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INFRASTRUCTURE

Study on
project schedule
and cost
overruns
Expedite infrastructure
projects

Foreword

Foreword from PMI India

Today, India is one of the leading outsourcing hubs in


the world. However, the world judges us not just by
the talent we have to offer, but also on the basis of our
infrastructure capabilities. India has set an ambitious
target of investing USD 1 trillion in infrastructure during
the Twelfth Five Year Plan period. Given this factor,
infrastructure development has been a key focus area
in every Indian state more so in the recent past. At the
center as well, big budgets have been allocated for
infrastructure development in every Five Year plan.
However, the country has consistently fallen short of
meeting such targets over the last few years. These
projects have been invariably riddled with issues of time
reasons for such schedule and cost overruns, Ministry
of Statistics and Programme implementation (MoSPI)
recommended PMI to conduct a Study, in consultation
with KPMG to highlight the major reasons for the time
and cost overruns across major sectors in infrastructure
projects. The projects surveyed in this report are from
nine sectors in the Infrastructure space viz. Power,
Petroleum, Coal, Steel, Railways, Roads & Highways,
Civil Aviation, Ports & Shipping, and Telecom.
It is a known fact that a large number of infrastructure
projects in India have been delayed due to regulatory
clearances, environmental issues and problems
pertaining to land acquisition. Also, there are challenges
in the tendering phase that affect viability of projects
thus delaying implementation, construction phase is
beset with over-runs and disputes and last but not the
least; provider skills are weak all across the value chain.
Given the critical role of infrastructure in ensuring a
sustained growth trajectory for India, it is imperative
that we identify the core issues affecting completion of
infrastructure projects in India and chalk out initiatives
that need to be acted upon in short term as well as long
term. This report attempts to identify these pertinent
issues and also brings out how professional project
management practices can bring about a positive
change in the completion of projects on time and within
budget.
Almost 79% of our respondents felt that the
infrastructure sector faces an acute shortage of skilled
project managers. This absence of project managers
with the requisite skill sets has emerged as the major
cause for time and cost overruns. Young graduates

today are being lured away be other seemingly lucrative


opportunities and project management education and
training is not yet getting the priority it requires.
Though organizations are realizing the growing need
for structured project management, many are looking
at short term training programs to enhance the skill sets
of their project teams. However, the situation warrants a
more serious approach. The survey reveals that by 2022
Indian infrastructure sector is likely to have a shortage of
around 3 million project professionals including project
managers, civil engineers, planners, surveyors, safety
professionals, etc.
The government too realizes the urgency of meeting
this skill dearth. In the Twelfth Five Year Plan, the
government has plans to focus on improving the project
management skills across country to get better returns
from public investment in infrastructure and also in
the social sectors. Project management, with a view to
deliver on time and within cost, is a learnable capability
that can be institutionalized in India. There is therefore,
a pressing need for industry and academia to realize
project managers must encourage and support their
professional growth. In addition, organizations must
will provide academia the impetus required to introduce
project management into their curriculum.
Project management is the imperative for Indias growth
story and we believe, the way forward is for industry
and academia to work in tandem on this course to reach
the countrys goal of being ranked as an economic
superpower and a developed nation.
Raj Kalady
Managing Director
PMI India

Foreword from KPMG in India

year plan, the government sets an ambitious target

It deliberates on both the external reasons for delays,


which are beyond the control of implementing agencies
and internal reasons, which can curtailed at the project
level with proper planning and project management.

infrastructure sector to bridge the huge infrastructure

The study also dwells on the proposed actions to be


taken for expediting infrastructure projects in India.

trillion through 2016-17 with 50 percent of the funding


to be met by private sector. Although, the sector is
considered to be a key driver of economic growth, time
and cost overruns threaten to limit the sectors potential

in its bid to highlight the reasons for overrun in the


infrastructure projects and possible recommendations.

Infrastructure plays a paramount role in the economic


growth of a country. Infrastructure investments in India

capital expenditure.
To understand the reasons for time and cost overruns
KPMG initiated the PMI-KPMG study on the request of
MoSPI to analyze the reasons for schedule and cost
overruns across various infrastructural projects running
across the country. The study was undertaken after
surveying key stakeholders in the infrastructure sector
and analyzing several key projects and comparing them
with best practices available globally.

Neeraj Bansal
Partner, Real Estate and Constructions
KPMG in India

Table of
Contents
Executive Summary

01

Reasons for Schedule Overruns

07

Reasons for Cost Overruns

23

Sector-wise Impact of Factor on


Cost and Schedule Overruns

33

Mitigation Strategies -

Project Management
Proven Method for Successful Delivery

47

Resource Shortage
Plaguing The Growth of the Sector

51

Recommendations Next Steps

59

Case Studies A Deep Dive Into Projects

69

Global Insights Learning From Global Projects

93

Sectors Overview
Understanding Infrastructure Sector in India

99

Appendix

123

SECTION

1 | Study on Project Schedule and Cost Overruns

01

Study on Project Schedule and Cost Overruns | 2

Executive
Summary

The KPMG in India - PMI study 2012 was initiated


on the request of MoSPI, highlights the major
reasons for schedule and cost overruns across
major sectors infrastructure projects. While
some projects are impacted due to external
factors which are beyond the control of the
implementing agencies such as land acquisition,
regulatory approvals, etc., majority of projects
are delayed by factors which can be controlled
at the project level through proper planning and
project management. The study also highlights
the severe skill shortage and the growing
professionals affecting the infrastructure sector
in India. Project owners feel this is a longterm issue which not only makes the projects
more expensive and risky, but also results in
compromise on quality as well as timelines.

3 | Study on Project Schedule and Cost Overruns

Infrastructure plays a paramount role


in the economic growth of a country.
Infrastructure investments in India have
been growing on a consistent basis. In
an ambitious target which is higher than

Dearth of skilled project managers


sector has emerged as the embryonic
cause for time and cost overruns in
the project life cycle. Resources are

delivery
Shortage of skilled project managers
emerges as the root cause for time and
cost overruns in a project lifecycle. It has

more lucrative options.


considered to be a key driver of economic
to limit the sectors potential to help
achieve the desired growth and ensure

in the infrastructure sector has been


declining as resources are going for
concern is felt across various stages
of project lifecycle. 79 percent of the
respondents agree that the sector faces
shortage of skilled project managers with
time/schedule overruns.

across various stages of the project life


cycle has been supported by 79 percent
of the respondents that advocate the
same belief of managers lacking the
further leads to issues such as prolonged
contractual disputes.

delivery is the paucity of skilled project


managers in the infrastructure sector.

Reasons for project time overruns across project lifecycle

Stages

Pre-planning

External issues

Delay in regulatory approvals


Unavailability/delayed availability of funds
Land/site handover

Internal issues

Lack of project managers/commercial managers


with adequate planning skills
Lack of cost managers

Planning and design

monitoring

Closure and
handover

Lack of strong R&R policies


Ineffective procurement planning
Design/scope change
Delay in regulatory approvals
Delay in decision making

Lack of planning engineer/commercial managers

Weak/ineffective project planning & monitoring


Contractual disputes
Unavailability/delayed availabiilty of funds
Lack of strong R&R policies
Delay land/site handover

Lack of project managers/site managers/planning


engineers/quantity supervisors
Lack of awareness modern equipment &
technology

Pre-commissioning teething troubles


Contractual disputes

audit and total quality management professionals

Study on Project Schedule and Cost Overruns | 4

Lack of requisite skill set as a major


cause of concern is also supported by
Survey 2012. About 45 percent of the
less apprehensive about unfavorable
economic prospects as compared

highlighted that while emerging markets


like India represent a big opportunity
for engineering and construction
accompanied by a high degree of

percent of the respondents considered


skilled resources as the single biggest

transcendental need for improvements


in the quality of project management
and internally. Structured and improved
respondents as a long term solution for
building professional capabilities and
enhancing skill sets.
About 72 percent of the respondents
consider internal training programs such
as developing in-house Project Academy
/ Center of Project Management
project managers as the pertinent step
to enhance the quality of talent available
in the near future. Other factors such as

cultural differences.

Cost overruns are fuelled by frequent


changes in design and weak
procurement planning, which can be
mitigated by adequate training and
coaching of project managers
About 67 percent of the respondents
feel that weak procurement planning
and frequent changes in design have a
huge impact on project cost overruns.

respondents agreed that these issues


have a high impact on the project cost but
can be mitigated by effective training and
coaching of the project managers.
companies today have a high-level
of awareness towards the need for

implementation of project management


also result in schedule overruns.

planning and monitoring strategies to

Source: KPMG in India - PMI Survey on cost and schedule overrun, 2012

5 | Study on Project Schedule and Cost Overruns

Lack of highly skilled professionals becomes critical to address


non-availability of highly-skilled professionals can have an adverse impact on the
shortage of around three million1
increase investment in training and mentoring to develop the requisite skill set in the

to introduce project management in the

offer a degree which seems to be


a critical requirement for any further
formal education in India and across the
globe. It is important to understand the
manpower and skill requirements of the
industries before we begin our reforms
growing Indian needs trained manpower

institutes as a part of the main stream


education. In many of the advanced
is considered at par with university

is not sought after by the bright and


ambitious students. One of the primary
reasons is that these institutes cannot
1

KPMG in India Analysis

support institutions that need manpower


to support them.
curriculum in main stream education is

standards and allowing globally renowned

institutes to set up training centers in


the best global construction companies
India and contribute to the richness of
help the Indian labor to be world-class and
claim higher salaries and wages.

Study on Project Schedule and Cost Overruns | 6

project delivery

concept for independent reporting and


About 86 percent of the respondents
agree that PMO could be an effective way
of monitoring projects. Project teams that
have adopted PMO feel that it helps in
ensuring successful implementation of
projects through deployment of project
management best practices. PMO also
and provides adequate guidance and
information for timely decision-making.

Proposed action points for expediting


infrastructure projects in India

once implemented could help in


debottlenecking infrastructure
projects and help ensure timely project
implementation within the stipulated

Introducing a single window clearance


mechanism to make the regulatory
approval process more effective

of in-house academies and


structured training programs

transparent transport policy for


movement of project materials
structure throughout the country to
monitor infrastructure projects
transparent bidding criteria

logistics system to enable faster


project implementation throughout
the country.

settlement mechanism

importance of project management


on improving the project management
skills across country to get better returns
from public investment in infrastructure
and also in the social sectors2. Project

program to impart project


management knowledge to

India.

Further strengthening Indias

Foster collaboration and


cooperation with educational
institutes to counter the
professionals well equipped to
handle infrastructure projects

An approach to the 12th Five year plan, Planning Commission, October 2011, p12

and PSUs on their respective internet


websites
Promoting balanced Public Private
sector for faster implementation of
projects
Promoting joint evaluation of project
design by project owners and
contractors for value engineering.

SECTION

7 | Study on Project Schedule and Cost Overruns

02

Study on Project Schedule and Cost Overruns | 8

Reasons for
schedule overruns

Majority of infrastructure projects in India are


affected by time overruns. These overruns vary
years, placing the project viability at risk. Survey
affect their projects and the challenges they
face in conquering them. These bottlenecks, as
enlisted below, are divided into two phases (i)
pre-execution phase and (ii) execution and closing
phase.

9 | Study on Project Schedule and Cost Overruns

Reasons for schedule overruns in the


pre-execution phase

Delays in land acquisition and site handover is the primary reason for schedule

land by project owners. Delay in subsequent land acquisition and inadequacy in project
planning considering the impact of deferred land acquisition is possibly the single

reason for project delays.

Exhibit 1: Reason for project schedule delay in pre-execution phase

Source: KPMG in India - PMI Survey on cost and schedule overrun, 2012

Delays in land acquisition are driven by several factors. One of the prime factors for
of poor compensation and the undervalued market price of land leading to many

project land value often appreciates considerably where in the incumbent owner does
not have any share.

82

%
respondents feel
that delays in land
acquisition lead to
project schedule
overruns.

Study on Project Schedule and Cost Overruns | 10

In view of the projects being affected


by resistance from local community and

the survey observed that project planning


and mitigation strategies have not been
reengineered to accommodate the global
leading practices to undo the effect of
such initial delays during the course of
project.

pronounced in transportation sector


Transport & Logistics and Energy
sector are the worst affected by land
acquisition issues.
such as Highway-Roads and Railway
this sector agree that their projects are
for a new rail line project in the State of

In this particular project, 70 percent of


the land was already acquired before
the start of the project. Acquiring the
remaining 30 percent took additional
6 months, leading to an overall project
delay.

project was to be acquired by October


the land acquisition process and inter-

General Manager,
Civil Aviation Sector

one of the most prestigious projects in


years due to the land acquisition issues.
adversely affect the sentiments of people
about the project. Land acquisition leads
to displacement and unemployment.

with scheduled completion date of


December 20042 got completed only in
January 2012 .

Exhibit 2: Sectors impacted by land acquisitions

and land degradation affecting the local


environment and the lifestyle of people.

stiff resistance from social activists and


locals alike. Land acquisition issues are

has been stalled due to peoples agitation


against the land acquisition1. Locals fear
will lose their agro-based sustainable
livelihood.

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

1
2
3

Poscos Orissa project hangs in balance, The Hindu, 21 June 2012


Golden Quadrilateral project may miss deadline, The Hindu, January 07, 2003
Govt declares Golden Quadrilateral complete, Indian Express, dated January 7, 2012

11 | Study on Project Schedule and Cost Overruns

Manifold regulatory approvals from several agencies leading to delay in


construction
the site ready for handover to contractors
for construction without hampering the

projects being undertaken in India has


increased substantially during the last

mandatory at the start of the project

challenge for the owners. Creating space


for installing additional equipment within

frameworks related to infrastructure


projects have also witnessed a

be challenged through public interest


litigations which could lead to project

in the country cost to the tune of INR


600 crore with duration of eight to ten
years4. Considering such large scale

environment clearances through direct

shifting of some units to other locations.


Considering that a majority of operational

majors project in Orissa is a striking

material within the construction site


thereby effecting the contractor
regulatory issues during the planning
stage to avoid any delays during the

signed a Memorandum of Understanding

project developers should ensure early


activities in the planning phase may leads
to potential delays in project completion.
Considering the geographical and
environmental limitations associated
with projects and the resistance they

compliances and the corresponding


entangled in legal and environmental
clearances. After a review of two and a
prevention of cost and schedule overruns
with better control on projects.
While the regulatory approvals related

stakeholder management has come


up as the basic underlying requirement
of mitigation plans across the sectors.
agencies had adopted stakeholder
assessment and periodic review of it as a

collaborations and foreign investments


have become fast track in the recent
for issues related to land acquisitions

inseparable part of project management


and monitoring practices.
During the interaction with Projects

and regulatory approvals do not have a

has an impact on subsequent project


plans resulting in unaccounted delays in
project delivery.

4
5

MoSPI, January 2012 Flash Report; KPMG in India Analysis


Poscos Orissa project hangs in balance, The Hindu, 21 June 2012

involves one of the largest FDI deal in


seven years5.

62

%
respondents feel that
delay in regulatory
approvals lead to project
schedule overrun.

Study on Project Schedule and Cost Overruns | 12

Another issue that leads to delays in


regulatory approvals is the multiplicity

sector is a case in point. In addition to


clearances need to be obtained from

regulatory authorities at the Central


and the State levels lack coordination
leading to standoffs on critical approvals.
Highways Authority of India etc. As most
often a State-wise disparity in granting
schedule.
other issues as inadequate support in

62 percent of respondents feel that delay


in regulatory approvals leads to project

is often a recurring delay in securing


regulatory approvals from governing
bodies and various ministries. For

80 percent of respondent opined


that metals and mining is the worst
affected sector due to delay in
regulatory approvals.

approvals for tree cutting required for

schedule overruns. Our interaction


with the project owners suggests that

major highway project faced a delay


of around one year due to delay in

be delayed on account of regulatory

towards shifting the utilities to make way


for construction. In many cases even
observed the time taken for activities
such as tree cutting is often prolonged to

approvals.

resistance from local communities.


Exhibit 3: Sectors impacted on account of delay in regulatory approvals
Taking clearances from various
authorities is a time consuming process;
often there is lack of team work among
different Government departments.
Managing Director,
Power Transmission Company

consistent across all infrastructural

requirements. Securing these approvals

Source: : KPMG in India PMI Survey on cost and schedule overrun, 2012

13 | Study on Project Schedule and Cost Overruns

Poor program management resulting in ineffective co-ordination with other


projects and schedule delay

require co-ordination with several other


projects. Delay in either of the projects

Inadequate co-ordination between


projects is primarily due to the lack
of detailed time and risk planning at

delivery of other associated projects


and eventually the entire program. For

completely foresee the synergies and the


risks among various projects leading to

of around INR 600 crore is delayed by


almost two years due to delay in power

the project management capabilities in

transmission line is to source electricity6.


survey with around 41 percent of the
respondents agreeing that ineffective
program management results in schedule
overruns due to inter-dependencies

41

%
respondents feel that
relationship with other
projects lead to project
schedule overrun.

KPMG in Indias
point of view
efforts required by project management
to be largely affected by the factors
generating from land acquisition and

project delivery are primarily due to

take these activities into account while


considering the time cycle for the project
completion.

can be mitigated by timely actions given


that the strong and periodic information
system is established to provide the
necessary information.
Although the factors affecting the
project timelines primarily appear to be
underlying reason behind them remains
requisites to overcome these factors. In

increase in number of stakeholders


and affected sections is inevitable. Also
the growing concern and stronger
measures for protection and restoration
of environment have added to the

in turn manifests into delayed project


delivery or higher cost at completion.

Based on one-to-one discussion with the survey respondent

Study
Bridging
on the
Project
Urban
Schedule
Housing
and
Shortage
Cost Overruns
in India | 14

Reasons for schedule overrun in


execution and closing phase
the infrastructure sector
Most infrastructure projects are victims of change in project design and scope which
often lead to project delays. Poor project planning coupled with lack of attention to
details leads to prolonged discussions between project owners and contractors/

project scope is generally low if a project has been planned well.

Exhibit 4: Reasons for project schedule delay in execution and closing phase

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

15 | Study on Project Schedule and Cost Overruns

Schedule overruns on account of changes


in the project design and scope during
investigation and topographical surveys.
Inappropriate assessment of geological
and topographical factors can lead to

later decided to split the construction

feature in large public sector projects


civil aviation and road construction.
commissioning in 20107.

79

stage can lead to disputes related to


regulatory approvals and construction
schedule overruns.

projected for completion by 2010-11.

%
respondents feel that
change in project scope/
design leads to project
schedule overruns in the
execution phase.

Exhibit 5: Criticality of design/scope change across sectors

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

Respondents from the road construction


segment reported that very often the
original project scope is considerably

79 percent respondents agree that


change in project scope leads to schedule

requirement to support a probable

civil aviation and telecom sectors are


more prone to delays because of scope
change vis--vis sectors such as ports and

has suggested to reduce road sector

In view of the fast growing requirements


have turned out to be the necessary

bidders8
companies in the bidding.
6
7

converted to advantage of the owners.

effective implementation of change


project management frameworks in use
the scope change cannot be done away
should be adopted to overcome the
impact of these changes on time and cost
budget of the projects.

Inclusion of change management


is required for effectively managing
changes in project scope.

Based on one-to-one discussion with the survey respondent


IOCs Paradip refinery behind schedule; may complete in 2013 Q1, The Economic
Times, 11 August 2011

NHAI urged to prune project sizes to attract more bidders, Business Line, 31 August
2012

Study on Project Schedule and Cost Overruns | 16

Availability of resources for


(i) Inadequate supply of project
management professional
professionals in India is a key challenge
for the infrastructure industry. Alternative
career options in lucrative industries such
services have become a more attractive
proposition for the fresh engineering

current education system is unable to


deliver the required number of specialists
across the project management value

Project managers, environmental


formalities before coming to India
which is a time consuming process and
generally comes at a higher cost.

top three resources infrastructure


industry is facing a shortage.

Exhibit 6: Ranking of resources in terms of their shortage in the industry

project management skill sets to take


vocational training curriculum needs to be
further strengthened and based on global
standards9.
Survey respondents also agreed that
the sector is facing a severe shortage of

project management.
Note: Percentage of respondents who felt that the industry is currently facing a shortages of these resources
Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

Power Projects in India: Implementation Challenges and Opportunities, Focus 2015 by


Raajeev B. Batra

17 | Study on Project Schedule and Cost Overruns

(ii) Limited availability of skilled


labor
manpower in India has not kept pace
with the growth in infrastructure projects.

Another issue impacting the progress of


infrastructure projects across industries
is the low productivity of labor due
to socio-cultural-political reasons. For

report according to which the Indian


face a labor shortage of 18-28 percent if
the country grows at a medium rate and
a shortage of 55-60 percent if we see
high growth.10

Lack of availability of skilled labor is an


issue. Unresponsiveness, strikes and
extended holidays further hamper the
timely project execution.
General Manager
Power Generation Company

etc. adversely affect productivity at


construction sites and impact the project

survey respondents also acknowledge


have an impact on project delivery.
employment schemes such as National

etc have created enough employment


opportunities for laborers in their local

55 percent of respondents opine that


non-availability of skilled labor is a major
and mining sector is worst affected by the
shortage of labor.

to travel to the project sites in search


availability of skilled labor for some
projects/States.

Exhibit 7: Criticality of lack of availability of skilled labor across sectors

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

10 World Bank; World Banks medium growth scenario is based on the vision documents
of the states and the country; and High growth scenario incorporates the massive
investments in national highways and rural roads announced by GOI.

Study on Project Schedule and Cost Overruns | 18

(iii) Shortage of good equipment


suppliers and contractors
Infrastructure projects especially
in power sector are hampered due
to lack of good contractors and

is a tedious and time consuming process.

infrastructure projects in the country are


growing at a faster pace than the capacity

percent of the respondents agreeing that


these factors impact project delivery.

has created a wide gap between the


demand and supply leading to delays
in completion of projects due to non
availability of key project equipments. For
power generation company has rolled
out several new projects with equipment
supply orders to yet another State owned
and countrys one of the largest power
equipment manufacturer. Many of these
projects are facing potential delays on
account of inability of the equipment
manufacturer to meet the supply orders
as per schedule. Indias inability to meet
power generation capacity addition
been mainly attributed to non availability

A key concern during the project initiation

India is also facing a shortage of


good engineering procurement and

planning and monitoring practices and


techniques being employed by owner
inadequate planning results in non-

few companies in India with desired

Availability of these contractors is a


challenge as their order books are already

India is overbooked by four times its


current capacity11.
resulting in contractual disputes and
Industrial relation and law problems
slowing down project progress

projects in the power sector are also


facing shortage of balance of plant
equipment such as coal handling and ash
handling systems.

There is lack of good equipment


manufacturers in the country leading to
heavy dependence on few players.
Executive Director
Steel Manufacturing Company

A common bottleneck in project


owners and contractors. Contracts
management is a major area of
improvement for large infrastructure
projects in India. 55 percent of the
respondents opined that contractual
disputes between project owners and
contractors act as a major deterrent in
arise on variety of reasons such as

Apart from the manufactured


also facing hurdles due to shortage of

Ineffective Project Monitoring

run the high risk of inferior quality of


equipment.

one of the prestigious road sector project


contracts encountered a high number
of legal issues. Of the total contracts
dispute12
relation and law problems require

11 Based on one-to-one discussion with the survey respondent


12 Report on Construction in India 2011, India Infrastructure

concerns while the result of ineffective


delay in decision making due to lack of
desirable information at the right time.
As per our discussion with various
management is basically a result of
shortage in acquisition of talent who are
conversant with the latest information
technology tools and applications for
project management.

19 | Study on Project Schedule and Cost Overruns

Lack of Integration Management


in project planning resulting in
coordination issues delaying the
projects
Large infrastructure projects by the virtue
of their impact and scale involve multiple

Other factors
Other bottlenecks such as precommissioning teething troubles are
management teams and corrective
some factors whose probability of

between various agencies becomes


a critical factor for successful project
usually a resultant of poor integration
during the planning phase. 50 percent
of the respondents Stated coordination
issues with project team or vendors as
one of the primary reasons for delay in
projects.

tops this list with 76 percent of the


respondents feels that this has high to
moderate impact on schedule overruns.

Exhibit 8: Extent of impact on project schedule in execution and closing phase

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

Study on Project Schedule and Cost Overruns | 20

21 | Study on Project Schedule and Cost Overruns

Factors impacting PSUs and non-PSUs


project schedule
for their projects and they dont depend
projects managed by public sector units

only 44 percent of non-PSU respondents


opined that this has an impact on project
delivery. In the recent years PSUs

investment decisions up to certain limit


aggressively and competing with private
sector for talent.

non-PSUs such as Railways and NHAI.


Although most factorssuch as design/

have more or less the same impact on


crore for Miniratna category II status .

bottleneck for non-PSU projects with 44


percent of respondents agreeing that

in decision making as compared with


inadequate availability of skilled resources
is more prominent for PSUs projects.

opined that this has an impact on project


agreeing that projects are delayed due
could be that PSUs have internal funds

Exhibit 9: Reasons for project schedule overrun for non-PSU and PSU projects

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

Study on Project Schedule and Cost Overruns | 22

KPMG in Indias
point of view
phase are affected by non availability of

changes in the scope and design of


projects push project delivery timelines.

project change management in case of


infrastructure projects in the country.

for seamless integration of different


functions of project/program among the
project management professionals often
lead to delays.
infrastructure sector lags behind
its foreign counterparts in terms of
knowledge and understanding of latest
technologies in engineering as well as
slow progress of infrastructure projects.

application of tools and techniques

SECTION

23 | Study on Project Schedule and Cost Overruns

03

Study on Project Schedule and Cost Overruns | 24

Reasons for cost


overruns

Cost revisions and cost overruns are common


across infrastructure projects. According
to MoSPI, infrastructure projects in central
Government sector costing INR 150 crore and
above, are currently experiencing cumulative
cost overruns of 16.9 percent1 of their planned
cost. Our survey makes an attempt to identify
the key factors, experienced by project owners,
resulting in cost overruns in a project from the pre
execution stage until the close out phase.
1

MoSPI flash report, dated January 2012

25 | Study on Project Schedule and Cost Overruns

Reasons for Cost overruns in preexecution phase

impacting cost overruns

assessment of the risks and mutual interdependencies that projects could face in the

70

drawing and designing of the projects at the time of award of contract is not mandatory.

%
respondents agree that
scope creep leads to
project cost overruns
in the pre-execution
phase.

be easily mitigated by putting an effective project management system in place and


providing training to project managers.

67

which affect the delivery both in terms of time schedule as well as budgeted cost.

Exhibit 10: Reasons for cost overruns in pre-execution phase

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

%
respondents agree that
inadequate DPRs lead
to project cost overruns
in the pre-execution
phase.

Study on Project Schedule and Cost Overruns | 26

Cost overrun due to inadequate DPRs is

Exhibit 11: Criticality of inadequate DPRs across sectors

energy and transport and logistics sector


respondents agree that inadequate DPRs
lead to cost overruns in their respective
sectors.

With increasing importance of


require additional budgets
As Indian regulatory agencies tighten
their noose by bringing in additional
project owners need to ensure project
compliance with stringent safety and
environment standards. Adhering to
the evolving environment and safety
standards leads to additional costs.

71

%
respondents feel high
cost of environmental
safeguards has high to
medium probability of
affecting the project cost.

Telecom sector doesnt experienced cost overruns for the surveyed projects
Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

Exhibit 12: Probability of reasons affecting project cost overruns in pre-execution phase

recent years has forced project owners


to include environmental safeguards
environmental policies in the country
construction project might need to
comply with these standards midway
the project can face cost escalations in

that the high cost of the environmental


71 percent assign a high to medium
probability of project cost overruns due to
this reason.

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

27 | Bridging
Study onthe
Project
UrbanSchedule
Housingand
Shortage
Cost Overruns
in India

Reasons for cost overruns in


execution phase

Material price escalation beyond projections is the primary reason for cost

Construction material prices have


increased several folds in last few years,
impacting the project cost estimates.
General Manager,
Civil Aviation Sector

estimates obsolete leading to cost overruns.


Exhibit 13: Reasons for project cost overruns in execution and closing phase

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

Study on Project Schedule and Cost Overruns | 28

over the agreed percentage leads to


dispute between project owners and

estimation during project cost scheduling


are not adequate to cover all aspects

between one of the Indias largest State


owned power generation company and
its initial equipment supplier on price

cost items that are necessary for the


project budget estimation remain either
at the planning stage and lead to cost
overruns at a later stage. Project teams

two years2.

material cost is most susceptible to


escalation followed by labor or manpower
cost. 67 percent respondents feel that
input materials are most susceptible
to suffer an escalation. While only
19 percent respondents opine that
Contractor/sub contractor costs are highly
felt that manufactured equipment cost
have a high susceptibility for escalation.

a realistic budget estimate for the project.

93

%
respondents feel material
price escalations beyond
projections lead to cost
overruns.

67

%
respondents feel
material costs are highly
susceptible to escalations.

Exhibit 14: Cost elements susceptibility to increase

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

Contract disputes delay NTPCs Barh project, Livemint, 1 May 2008

29 | Study on Project Schedule and Cost Overruns

Poor connectivity to project site


Infrastructure projects located in
remote locations have poor transport

Inadequate availability of skilled


resources

Apart from the direct manpower required

adequate availability of skilled resources

project management personnel are

appeared as critical factor for success


of project. Owing to the additional
employment support schemes

compensations leading to cost overruns.

transportation and logistics infrastructure


project located in a hilly terrain with no
on roads for its raw material supplies.
the locally available employment
consuming and costlier in comparison to
workforce for construction works has

respondents felt that poor connectivity


to project site has high to medium
probability of impacting the project cost.

Exhibit 15: Probability of reasons affecting project cost overruns in execution and closing
phase

project site can also have an additional


impact on project schedule and cost. In

to delays. Stormy weather can also affect

hydroelectric power project of a leading


hydro power company in Leh district
of Jammu & Kashmir has reported an
additional delay of 9 months due to highly
inclement weather conditions of Leh and
Ladhakh .
under harsh conditions tends to be higher.
In an isolated region workers may face
lack of after-work activities to take part in

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

conditions workers demand higher


requirements.

74

%
respondents feel that
location and connectivity
of project site has high
to medium probability of
affecting the project cost.
3

306 Flash report on central sector projects, MoSPI, April 2011

Study on Project Schedule and Cost Overruns | 30

Other factors impacting project


costs
Other factors such as weak procurement

Factors impacting PSUs and


non-PSUs project cost

technology etc. adversely impacts the


project costs. During procurement

impact on the schedule overrun and the cost overrun.

heed to the elements of material cost

to project cost overrun. It has been observed that PSUs borrow


money from bank/lenders at market-determined interest rates
to fund their projects whereas non-PSU projects are primarily

tenders are placed on a need basis.

delivering the project. 88 percent of PSU respondents agree

on the quantitative advantages of low cost


or building long-term relationship with
suppliers by placing bulk orders.

whereas only 56 percent of non-PSU respondents echoed the

for better procurement management of PSU projects. Other


of the suitability of the procured
equipments and materials to the work
site results in repetition of the entire
procurement process resulting in further
to adopt the best available technology
also results in frequent changes in
the procurement process leading to
increased cost and time.

could be easily controllable with well


established project management
techniques.

Exhibit 16: Reasons for project cost overrun for non-PSU and PSU projects

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

31 | Study on Project Schedule and Cost Overruns

KPMG in Indias
point of view
Although uncontrollable factors such
realistic estimate can go a long way in
providing accurate and timely information
to relevant authorities to take more

the country has been consuming a major


project funding had been in the domain
that need to be addressed with-in time to

are usually due to the lack of information

private players have also ventured into


have repeatedly failed to address the
issues related to contracts administration

that planning and implementing agencies


the need for cost control even more
substantially.
facing huge cost overruns due to multiple
reasons ranging from delayed approvals
to scope creep and shortage of project
professionals to price escalations and
contractual disputes.

Study on Project Schedule and Cost Overruns | 32

SECTION

33 | Study on Project Schedule and Cost Overruns

04

Study on Project Schedule and Cost Overruns | 34

Sector-wise impact
of factors on cost
and schedule
overruns

The aforementioned factors have a varying


degree of impact on the project delivery from
one sector to another. For example, coal sector
is more sensitive to regulatory approvals, as
and it takes around 3-5 years for acquiring all
requisite forest and environmental clearances.
On the other hand, telecom projects are least
impacted on account of regulatory approvals.
Similarly, scope creeps are common in airport
infrastructure projects mainly due to the need
to accommodate allied services (such as
immigration, custom, etc). Following section
provides sector-wise analysis of how various
factors affect the schedule and cost overruns.

35 | Study on Project Schedule and Cost Overruns

Reasons for schedule overrun across sectors

Human resources

Petroleum

Power

Coal

Steel

Civil Aviation

Railways

Roads &
Highways

Port &
shipping

Telecommunication

Land/site handover

Delay in regulatory approvals

Relationship with other


projects
Ineffective procurement
planning

Design/scope change

Weak/ineffective project
monitoring
Inadequate availability of
skilled resources

Contractual disputes

Lack of awareness of modern


equipment

Very high impact


Source:

High impact

Moderate impact

Low impact

Study on Project Schedule and Cost Overruns | 36

Reasons for cost overrun across sectors

Human resources

Petroleum

Power

Coal

Steel

Civil Aviation

Railways

Roads &
Highways

Port & shipping

Scope creep

Design change/iterations

High cost of environmental


safeguards
Acquisition of land at market
price

Inadequate DPR

Weak procurement planning

Material price escalations


beyond projections

Poor selection of consultant

Location and connectivity of


project site

Very high impact


Note:
Source:

High impact

Moderate impact

Low impact

SECTION

37 | Study on Project Schedule and Cost Overruns

05

Study on Project Schedule and Cost Overruns | 38

Mitigation
strategies Helping
project delivery

The successful delivery of projects is affected by


a wide variety of internal and external factors.
Although, both internal as well as external
factors impact the delivery of project, internal
factors remain an area of concern by virtue of
them being controllable. To deliver projects
on time and within budget and scope, global
infrastructure companies use formalized project
management practices and take supportive
steps for the developing the competency in
this area. Additionally, with increasing project
size and complexity, many companies have
institutionalized the use of standard methods
for project and risk management. Also, various
nations have showed an increased willingness to
invest in training and development for project and
program management staff.

39 | Study on Project Schedule and Cost Overruns

In view of the shortage of in-house

is an effective way for monitoring


projects

a relatively new concept in India and is


being widely used by Indian companies.1

tracks the status of the projects and


to cost and schedule overrun and allow
companies to take corrective actions

project managers highlighted that due

are not able to function to the desired


level of capability.

independent body directly reporting to


the Board of Directors about the progress
of project and supports oversight on
the projects. It drives successful
implementation of leading project

Risk Management has been widely


adopted and welcomed as a key measure
of mitigation against project overruns. A
comprehensive and detailed risk planning
and monitoring establishment ensures
prior detection and timely alerts on
changing response of various risks.

project against risks and ensuring


adequate guidance and information for
timely decision-making. Implementing a
PMO could help in achieving the following

In addition to adoption of global best


practices of establishing PMO and risk

Reduced cycle time and delivery


costs:
standard set of project management

for improvement in project planning and


monitoring capabilities along with better
risk management as areas requiring
immediate attention for improved project
delivery.
projects and training of project staff for
better understanding and knowledge of
project management practices such as

most effective measures for successful


project delivery.

globally established standards improves


the acceptability of the deliverables
worldwide.

enables project managers with an


established and tested module for better
management and monitoring of projects.

established methodologies at regular

enabling timely decision making by the


relevant authorities.
Improved accuracy of project
estimates:
of the potential risks and benchmarks

of the trained professionals reduces the


chances of errors in different estimations.
Improved people and resource
management:
mentors managers to build core project
management competencies. In certain
resources between various projects
forming part of a common program

components help projects to engage


of these resources.

the learning time for the project team


while adapting to the limitations and
uniqueness of a project.
Improved quality of project
deliverables:
international best practices used at

Re-use of knowledge and the ability to


leverage that knowledge on current /
future projects:
repository of key learnings from a
project pertaining to best practices
learning are disseminated to all
and applied to current/future projects
thus avoiding the risk of similar issues at
different projects.

Our company has a concept of Integrated Project Management (IPM), under which all
departments related to a project directly report to the project Executive Director (ED).
report to the project ED. This avoids bureaucratic delays within the organisation and
facilitates faster decision making.
Executive Director,
Steel Manufacturing Company

PMI-KPMG study on drivers for success in infrastructure projects 2010 Managing for
change

Study on Project Schedule and Cost Overruns | 40

PMO Role

PMO Responsibilities

PMO Manager

PMO Management;
Quality Management;
Stakeholder Management

Planner

Work plan/ milestone


Management;
Scope management

Coordinator

Project Support: Scope,


integration, change and resource
management

Controller

Financial Management

Program Administration
Support

Project Support: General


Administration

Project Information

Internal and external project


communication (not change
management)

Project Stream
Lead

All typical PMO responsibilities


for each of the work streams

Monitor project performance


against the set targets and act as
an information center on project
progress
Set-up and deploy standard
for project implementation
Mentor Project managers for future
project needs
Provide consulting support on project
planning and implementation
Conduct portfolio management
i.e. monitor inter project

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

86 percent of the respondents felt


the need for an independent PMO for
monitoring project and positively reacted
in its potential to manage cost and
schedule overruns.

41 | Study on Project Schedule and Cost Overruns

Risk Management techniques are


used by only 56 percent of the
respondents
An effective risk management
includes the processes concerned

Exhibit 18: Usage of risk management techniques for identifying and monitoring risk

monitoring and control during the life


cycle of a project. Indian infrastructure
companies are yet to match their global
counterparts in developing a riskaware
culture and a rigorous risk management

respondents said that they have a


risk management process in place for
our discussions with the project
managers suggest that many companies
where the risk is fully integrated into
every aspect of the construction life cycle.
Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

have established risk management


Exhibit 19: Effectiveness of risk management practices

effective. Only 18 percent respondents


felt that there is a further scope of
improvement. Out of the entire gamut
percent opined that they have effective
risk management procedures in place.
further established by the fact that at
projects were running behind schedule

planned budget2.

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

315 Flash report on central sector projects, MoSPI, January 2012

Study on Project Schedule and Cost Overruns | 42

Ineffective project planning and


project monitoring is rated as
maximum impact on project
delivery

Exhibit 20: Impact of risks on project delivery

a project and decrease gradually over a

is of utmost importance to do a detailed


project could be completed effectively

planning is even highlighted by the survey


results. 74 percent of the respondents
rated ineffective project planning and
factor impacting project schedule and
Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

are some other factors which could


risks could be easily manageable at the
project level through an independent and
objective risk management team that
conducts risk reviews periodically and
can put in place a mitigation plan that is

Improve risk management skills for


successful project delivery

Exhibit 21: Strategies to enhance risk management in projects

improving risk management in projects


is to enhance the risk management
the respondents believe that imparting
training to project team for identifying

discussion with respondents highlighted


that majority of the project teams havent
received any formal project or risk
management training.
Developing project risk management
reviews and developing risk management
reports are some other factors that could
positively impact the risk management in
projects.

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

43 | Study on Project Schedule and Cost Overruns

Strategies to control schedule


overrun
Periodic review and oversight is one of
the most commonly adopted strategy

Exhibit 22: Commonly adopted strategies to control project schedule delays

primarily because infrastructure projects


generally span over a long duration and
hence require regular progress review.
projects also keeps evolving constantly.
required at the various stages of the
owners and contractors only attempt
to avoid and overcome the type of risks
planning stage. Such a risk management
process often leads to failures as the
risk managers do not pay attention to
the evolving circumstances and fail to
envision the bottlenecks that might
have to be encountered at a later stage.
progress regularly.

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

Exhibit 23: Effectiveness of project monitoring tools

maintain periodic risk management


reports to identify the probable project
split the various stages of the project
into smaller components to track the
target achievement on a regular basis.

closer monitoring.
Project reviews by third parties is
another technique to review projects.
Independent reviews by third parties
provide an objective opinion on the

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

in bringing new ideas and break short


sighted thinking.
Project plans also suffer due to lack of
and generator room for the functioning
an international airport in eastern India
required the demolition of an old building
which stationed critical facilities such

team unable to assess the criticality of


the building and hence did not suggest
an appropriate relocation of the facilities
the delay in demolition of the old building
and affected the time schedule of the
project.

Project reports and project management


tools are rated as most effective tool
dashboard.

Study on Project Schedule and Cost Overruns | 44

Risk and reward program for project management teams/contractors are


used occasionally
Risk and reward program for project
management teams and contractors
are not common in comparison to other

reward program in the project plan for


appropriately rewarding the project
team and the contractors for meeting

percent respondents frequently used risk


and reward program as a measure for
controlling schedule overruns. Due to lack

risk-reward programmed should be


manner so that it motivates not only
the top level personnel of the project

contractors and subcontractors are not


motivated enough to take interest beyond

the project management teams desist


from introducing innovative moves for

at all the levels of the team. Incentives

encouraging the project team to apply


innovative techniques for meeting the

45 | Study on Project Schedule and Cost Overruns

Strategies to control cost


Due to the long gestation period of

Exhibit 24: Strategies used to control project cost overruns

include cost escalation clause as a part


of the contract agreement. 65 percent
of the respondents use this strategy to
cost effective project designs and joint
evaluation of project design for value
engineering is also used frequently.
their procurement methods to manage
cost.
Project owners need to develop long
term relationship with the contractors
and sub-contractors so as to map their
performance over a period of time and
identify the better performers. Deploying
practices such as demand consolidation
of high spend categories across the
developing new vendor and preferred
relationships through long term contracts
can also help in lowering the project

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

tracking the source of materials should


also look to leverage supplies from lowcost countries such as China and Russia
in cases where the domestic supplies are
not cost effective.

contract with the vendor, thus any cost


increase is borne by the contractor.
General Manager,
Telecom company

Study on Project Schedule and Cost Overruns | 46

Issues faced in adopting control strategies


in adopting schedule control strategies. 86 percent of our survey respondents
suggest that they are unable to adopt controlling strategies on time due to stringent
from day to day operations requires an approval from higher authorities. Another
major reason highlighted in the survey in adopting the mitigation strategy is the

Exhibit 25: Issues faced in adopting the schedule control strategies

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012

SECTION

47 | Study on Project Schedule and Cost Overruns

06

Study on Project Schedule and Cost Overruns | 48

Project
management
Proven method for
successful delivery

Challenges in capital projects have grown multi


folds in the last decade. First experiment at three
lane track capacity enhancement by railways,
set up of countrys largest thermal power plant,
construction of large hydro power plants initiating
one of the biggest planned human exodus,
development of one of the worlds largest airport
in shortest time, etc. have only added greater
emphasis on established project management
techniques and practices being adopted from
project inception till closure.

49 | Study on Project Schedule and Cost Overruns

arises from the need to institute

provide clarity on roles to ensure


authority is matched with responsibility

and contain costs. It thereby aims to

technical challenges along with sensitivity


in general public and political scenario
have not only induced the need for
objectivity / independent opinion / valued

also on usage of assortment of project


practices.
Absence of robust Project Management

quality to project needs and augment


customer / coordinating agency
satisfaction.
Project Management encompasses
setting up and sustaining practices /

relating to resource unavailability and or


resulting in disputes further leading to
considerable resource spending on heavy

project interdependencies for review


stress on planning and management tools
creating database for risk analysis and
building knowledge management
repository from lessons learnt. It
includes proposing consulting support

management.
project skill development programs
and mentoring services to managers

environment
Inaccurate forecasts on usage
market conditions and imminent
technological bottlenecks
Due diligence decisions and
ascertainment of risks / changes in
decision making process

future project needs. Provisioning of


training budget / level of investment
in professional training for employees
collaboration with educational
institutions / professional management
Management benchmarking forums are
crucial mechanisms to cultivate project

Absence of new ideas being brought


in causing short sighted habits and
thinking.

Study on Project Schedule and Cost Overruns | 50

SECTION

51 | Study on Project Schedule and Cost Overruns

07

Study on Project Schedule and Cost Overruns | 52

Resource
shortage Plaguing
the growth of the
sector

The Indian Infrastructure sector plays an


important role in the India growth story servicing
the needs of the both public and private sectors.
The sector has a huge multiplier effect on the
growth of the economy. However, it faces
manpower challenges, which are detrimental to
the growth of the sector.

53 | Study on Project Schedule and Cost Overruns

a dearth of skilled manpower across


sectors and this shortage can have an
adverse impact on the delivery and

respondents feel that lack of project

skilled project managers is proving to


be challenge in the Indian Infrastructure
sector and this situation in likely to get
even the current education system is
unable to deliver the required number
of specialists across the project

apparent across various sectors as well.


respondents in the energy sector feel that
lack of skilled project managers is a major
cause of concern.

engineers with the desired project


management skill sets to take up larger
roles.

Sector-wise shortage of skilled professional - A cause of concern across sectors

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012; KPMG in India analysis

Study on Project Schedule and Cost Overruns | 54

Lack of skilled project managers is the root cause for the time overruns in
a project

Sector-wise shortage of skilled professional - A cause of concern across sectors

Source: PMI-KPMG survey on cost and schedule overrun

highlighted in the KPMG Internationals Global Construction Survey 2012 indicates


that about 45 percent of the respondents in the ASPAC region are less pessimistic
continuing worry.

Lack of availability of skilled labour


is an issue.
General Manager,
Power Generation company

55 | Bridging the Urban Housing Shortage in India

Building Capabilities Paramount to

Indian economy has been witnessing a huge spate of


infrastructural investments over the last few years and the trend
is bound to continue for the coming years as well. We have been
witnesses to the strong and sustained growth powered primarily
by investment in various infrastructure segments. Construction
is the second largest economic activity in India after agriculture
in terms of employment and has been growing at a pace
never seen before1

Demand for construction professionals is growing in


India

an increase in demand for the construction professionals across


the project management cycle.

of the main stream.

Requirement of human resources for construction industry (000s)


Human resources

2010

2022 - Forecasted

928
647
Clerical
Skilled workers
Unskilled workers
Total

56960
35000

Source:

1
2

MoSPI, January 2012 Flash Report


An approach to the 12th Five year plan, Planning Commission, October 2011, p123

92000

Study on Project Schedule and Cost Overruns | 56

industry would require between 4.6 5.2 million professional which is around four
.

Demand of skilled construction professionals by the end of 2022 (in 000s)


Professionals

2010 - Estimated

Project managers

70

Civil engineers

815

Planners

50

Surveyors

50

Quality control professionals

100

2022 Forecasted

50
Total

1135

4585-5190

Source:

While the supply of project professionals is not able to keep pace with the demand
Many infrastructure projects in India are suffering due to the

Another reason is the number of students that could enroll


for civil engineering courses has not increased much in

project professionals. One of the reasons for this is the lack


of focus on project management courses in Indias education
degree/diploma courses on project management in comparison
to China which has more than 100 universities offering different
courses in project management4. Further there are very few
institutions that offer courses on Infrastructure management.

provide detailed knowledge about the international standards


introduce project management as a subject in engineering and
management courses.

3
4
5

KPMG in India Analysis factoring the investment projections and distribution of


human resources in infrastructure sector
India lagging China in project management,The Economic Times, 18 June 2010
A High-Tech Titan Plagued by Potholes,The New York Times, 25 August 2010

science and other information technology programs reached to


5
.

57 | Study on Project Schedule and Cost Overruns

Supply of skilled construction professionals by the end of 2022 (in 000s)6


Professionals

2022 - Forecasted supply

Project managers

120

Civil engineers

1400

Planners

90

Surveyors

85

Quality control professionals

170
85

Total

1950

Source:

workers employed across all categories


workforce has been consistently going
between demand and supply of skilled
professionals impacting the project

percent of the total demand7


in skilled workers proportion brings out
the need for skill development of the
workers employed in the industry.

Shortage of Project Professionals in 2022

Source: NSDC - Building, Construction and Real Estate Services Sector (2022); KPMG in India Analysis

6
7

KPMG in India Analysis assuming number of students passing out each year and
percentage of students joining the infrastructure industry
KPMG in India Analysis assuming number of students passing out each year and
percentage of students joining the infrastructure industry

Study on Project Schedule and Cost Overruns | 58

Hence building project


management capability and
maturity is priority for most
organizations in India
Shortage of talent in the construction
sector is a long term problem and will
continue to push up project costs and

institutes with the capability to scale.

providers to attract more school leavers

offered through various schemes


currently are clearly inadequate to meet
the demand of the large percentage
of unskilled workers in the Indian labor

industry. Companies should also seek


to stay in touch with changing employee
aspirations. By encouraging diversity in

not delivering the required number of

sector can reach out to a wider potential


audience that perhaps would not
previously have considered such a career.

We surveyed respondents on measures


that could be adopted to build the project
management capabilities among the
employees. Majority of the respondents
agreed that the following strategies are
effective means to overcome resource
Meaningful steps would have to be taken
to support both the infrastructure and

step would be to correct the internal

management and the skilled/semi-skilled

to make the Construction industry


competitive and enable it to match the
growth of other sectors of the economy.
ecosystem with partnerships between

more than 90 percent of our population


receives no vocational training8. So the

on training and higher salaries where


possible.
support and enhancement of collective

Strategies to overcome skill shortage

Survey response
Very Effective

Develop in-house Project Academy / Center of Project

Develop structured training programs and succession plans to


build strong professionals
Propagate Infrastructure and allied sector as a lucrative
employment option

compensation

Source:

Case for Setting up Sector Skill Councils in India, CII, p7

Effective

SECTION

59 | Study on Project Schedule and Cost Overruns

08

Study on Project Schedule and Cost Overruns | 60

Recommendations
Next steps

Based on the survey responses along with our


research and experience of project managements
recommendations for Government, policy
makers and project owners that could help in
debottlenecking infrastructure projects and
improve project delivery in the country.

61 | Study on Project Schedule and Cost Overruns

01

Set up a single window clearance mechanism to simplify


the regulatory approval process
construction approvals and made changes
to the rules applicable to construction

guide along with a list of required


is a need to develop an effective single
addresses and contact details.

mechanism facilitates and streamlines


interaction with different regulatory
authorities and provides a single point
of contact for all permits and approvals
necessary for infrastructure projects.

Open single service windows that

of dealing with construction permits1.

them to relevant authorities to

implemented single window clearance


for industrial developmentmodel
that can be replicated for infrastructure

and save time.


window into one stop agency that
processes applications internally
and has the authority to take
informed decisions by comprising
representatives of various approval
agencies at a central level.

and clearances and increasing


transparency in the approval system.

policy framework should be universally

India ranks at number 182 among 185


economies on the ease of obtaining

and amongst various States. Some

it is important that the core policy should

project. Institution failing to meet these


timelines should attract penalties.

illustrates Indias status versus other


countries on various aspects related to
construction permits.
any construction project requires

single window clearance facility to


clearances from various authorities under
one roof to set up industrial units in the
introduced single Window clearance in

. Investors
can submit proposals online and avail

in upgrading technology infrastructure


to consolidate and streamline various
processes and stages related to smooth
granting of approvals.

almost 196 days to conclude. With the


introduction of single window clearance

implemented a single window for pre-

approvals with a step-by-step

Indicators

India

Dealing with
Construction Permits

182

196

Brazil

Indonesia

Japan

181

75

72

17

28

469

270

Source:

1
2

China

Doing Business 2013, World Bank, October 2012


http://www.indextb.com/destination-gujarat/formalities.aspx

14
158

Mexico

10
69

Best performer
globally (Global
Ranking)

Study on Project Schedule and Cost Overruns | 62

their say in the clearance process


implementing an effective single window
Empowerment: A single window
clearance agency would be able
to promote investment and
allow smooth implementation of
infrastructure projects. It is important
departments towards effective
functioning of such an agency
that ushers positive growth in the
infrastructure sector by providing all
regulatory approvals in a time bound
manner. Different authorities often
feel that they will eventually lose

02

that such a project may requirethey


need to be assessed for upgrades or
replacement.

department emerges. Such an agency


needs to be safeguarded by senior

smoothly.
Investment in technology:
is need to allot appropriate budget
for setting up and effectively
running single window operations.

of the requisite documents and


process guide to allow easy access to
information and smooth processing
the approvals can be obtained through
a single access point that collects

infrastructure to access various


infrastructure projects in the country.

country to monitor and de-bottleneck infrastructure projects

of central sector projects in 16 sectors

oversights at national level. All projects

current mechanism of monitoring


projects is at a broad level and doesnt
focus on project de-bottlenecking to
avoid cost and schedule overruns.

importance would fall under this structure.


Below is the structure and functions of

Three-tier structure for PMO


PMO

Functions
1.
2.

4. Country strategy for competence development.


1.
2. Reporting to PMO at the centre on the current status of projects.
PMOs in each State

4.
5.

PMOs in implementing
agencies
Source:

1. Monitoring and reporting to State PMO on the current status of projects.


2.
Building project management capability at the site.
4. Identifying trained manpower requirements and arranging for training and competence development.

63 | Study on Project Schedule and Cost Overruns

03

Modify bidding criteria procedures


Another alternative could be allowing the
project owners to negotiate with other

awarded through competitive bidding.


compromise on quality and timeline by
deploying resources so as to be within
the quoted price.

be conducted in a transparent manner


through reverse auctions. Under reserve

capabilities are eligible to bid for the


projects. Once the qualifying criteria
project solely depends on the bid cost/
survey respondents are of the view
that awarding contracts in this manner
may not be healthy in the long term
from the perspective of project quality

is awarded to the contractor whose

without knowing the identity of the


instantly have an understanding of where
they stand in relation to other bidders.

safeguards against signing a construction


contract for an unrealistically low bid
price that would almost certainly lead to
and provide feedback for participants.

may not necessarily include all the cost

04
A few initiatives that could improve the
process and may take several years

Create Dispute Resolution Board (DRB)


to avoid disputes: DRBs are created

Strengthen existing arbitration laws:


and the contractor to monitor the project

arbitration is a preferred mechanism

arbitration mechanism in a way that


makes it more effective and enforceable.

arbitration mechanism is still evolving.


1996 was enacted to achieve the

such as an Infrastructure Projects


settlement of these disputes.

reality is far away from the target. One


of the underlying causes is that neither
the public nor the private sector in
India is enthusiastic about the idea of
that Arbitration awards are invariably
challenged in the court on account of

of proceedings.

Encourage institutional arbitration:

Construction Industry Arbitration Council

monitor the progress of the project with


respect to contract requirements. In
case of any non compliance with respect
interferes and suggests ways to resolve
the dispute.
However one of the ways to deal with
disputes is to avoid disputes. Many
disputes in the infrastructure sector could
be avoided if contract agreements are

Institutional arbitration provides an


costs and risks into consideration.
ensures impartial decision-making and
adherence to pre-established rules and
procedures.

Arbitration and Conciliation Act 1996, Vakilno1 website, http://www.vakilno1.com/


bareacts/arbitandonciliation/ArbitrationandConciliationAct-1996.htm, accessed 15
December 2012

responsibilities of all parties could help in


avoiding unnecessary misunderstandings.

Study on Project Schedule and Cost Overruns | 64

05

Institutionalize project management training


for professionals

lack of project management skills in


professionals working on infrastructure

it is important to introduce project


management in the curriculum of

Build in house academy for the project


management training: Infrastructure
companies to meet the shortage of

delivery. Indian project managers have


acquired project management skills

the project management courses in the

have developed in-house academy for


training their employees on key skills
needed for their day to day work. Indian
infrastructure industry can look to

follow.
need to impart formal training to project
managers and regularly update their skills.
their day to day work but also equip them
to handle new challenges in the most

Change curriculum to introduce


project management:
institutes in India are not giving much
importance to the project management
curriculum and in comparison to other
countries very few institutions in India
offer project management degree

number is less than 104

Cooperation between industry and


educational institutions:
need for greater degree of collaboration
between the industry and educational
institutions so as to reduce the
demand supply gap for trained project
management professionals. Industry
can help educational institutions

educational institutes would not only


for project management professionals
but can also help in enhancing the

training.

India lagging China in project management,The Economic Times, 18 June 2010

training can be conducted for newly


enhance their professional competencies.

65 | Study on Project Schedule and Cost Overruns

06

Reform Indias Vocational Education and Training program to


create a large pool of employable work force
people by 20227
following two initiatives could help in

of skilled people available locally. State

needs to improve the education and


infrastructure sector. According to

people. So when the construction of

Creating a National Board for


vocational education

among the local people about the

should have the representation from

upper secondary level5


not responding to the needs of the labor
6

developing a broad-based curriculum


for vocational education based on

Creates large pool of locally available


skilled and employable people
Less resistance from local people

and industry need to come together and


develop a mechanism to impart training
and develop skills.

ensuring a close interaction between


industries and vocational institutes

Setting up of National Skill Development

to facilitate skill development in the


country is a step in right direction. NSDC
targets to enhance skills of 150 million

5
6
7

employment from this project

developed further for plant operations.


Developing skills of local people by
corporates
land acquisition and regulatory approvals
could start imparting training to the local

World Bank report on vocational education and training system in India


World Bank report on vocational education and training system in India
National Skill Development Mission, Press Information Bureau, 16 August 2010

Study on Project Schedule and Cost Overruns | 66

07

enable faster project implementation

reduce transportation cost. Under phase


pace with increasing logistics demand.

is need to reform the Indias transport


and logistics sector. Our survey results
indicate that many projects suffer from
lack of good transport infrastructure
in the country. As mentioned by our

non availability of last mile connectivity


to project sites and high cost of
transportation are some of the factors

mega projects is way behind targets.


projects and take all possible steps to
remove bottlenecks for timely completion
traverse the distance from Dadri to
start planning for at least two additional
DFCs Delhi-Chennai and ChennaiMumbai.
will start from Ludhiana in Punjab and
Pradesh and Bihar before terminating at
Dankuni in West Bengal9.
railway connectivity along the western

percent of Indias total freight . For many


large infrastructure projects particularly

a mega investment project of USD 90

only transport mode for equipment and


construction material.11

of the project.
Following steps could help in improving
the transport infrastructure in the

Increase national highway networks


and improve road maintenance
program:

envisages to develop 9 Investment


Expedite the construction of Dedicated
Freight Corridors (DFC) and create
new DFCs:
to increase the railways transportation
capacity by building high-speed and
high-capacity dedicated freight corridors.

national highways and adding new

a systematic road maintenance plan


regions are across the States of Uttar
Maharashtra10.

reduce travel time by a third8

8
9
10
11

Freight corridor back on track, Times of India, dated November 16, 2011
Dedicated Freight Corridor Corporation of India (www.dfccil.org)
Delhi Mumbai Industrial Corridor (www.dmic.co.in)
India Transport Sector, World Bank

average speed and reduce transportation


cost.

67 | Study on Project Schedule and Cost Overruns

08

Create an exhaustive list of empanelled vendor at Central


level for infrastructure projects

departments maintain different


empanelled list of vendors for their
respective projects and services. For

there should be a provision of updating

removing the non-performing ones.


list of empanelled vendors at central
information about the vendor credentials

the knowledge of project management


ensure that vendor has the complete
knowledge of project management
information provided by the vendors

09

Create a large pool of registered


vendors to choose from across the
country

Reduce possibility of forming


cartel by vendors as large number
of vendors would be available for a
particular work
Pressurize vendors to excel in
projects as poor performance on a
single project could cost them the
delisting from the central empanelled
list.

Reduce time in awarding the


contracts as awarding a contract to
the empanelled list vendor doesnt
require background check as the
vendors credentials are already
could save an average of 2-4 months
in awarding the contract

Promote Public Private Partnership (PPP)


in Infrastructure sector

Ports have been funded by State and

is looking at increased participation


from the private sector for transport

investment has fallen short of the

toll collections in India are fraught with


challenges such as revenue leakages
which are proving to be a major deterrent
for private investment in roads.12
Following steps could help in promoting
PPP investment in the infrastructure
Create a detailed policy for
implementing PPP projects:
is need to create a detailed PPP policy
the preferred scheme for each sector and

Ensure adequate returns to private


players:
infrastructure projects are regulated and

returns to private players on their invested

necessary safeguards.
Develop long term debt market for
infrastructure projects: PPP design
and policy should provide adequate

road segment private sector invested


aim to bring more transparency in the
Private road developers depend largely
on highway toll collections as a medium

participation of private investors in the


infrastructure sector.

12 Mid-term appraisal of Eleventh Five Year Plan, Planning Commission

to lend their money to PPP projects.


longterm bond market and promotion of
infrastructure bonds could result in better
participation from foreign investors.

Study on Project Schedule and Cost Overruns | 68

10

Promote joint evaluation of project design


for value engineering
Project owners and contractors should

lack value engineering approach


leaving minimal opportunities for

contractors and companies lack adequate

does not motivate the contractors


enough to employ value engineering
approach as they do not get any incentive
for the savings.

engineering decisions in projects based


engage the contractors for joint evaluation
of project design. Contractors need to
set-up dedicated value engineering teams

the contractors should also attempt


to collaborate with global engineering
institutes and companies so as to employ
project.

cost saving at the various stages of


project implementation. Based on the
performance of the value engineering
in the estimated cost saving or other
incentives to drive them for greater
adoption of value engineering concepts.

SECTION

69 | Study on Project Schedule and Cost Overruns

09

Study on Project Schedule and Cost Overruns | 70

Case studies
A deep dive into
projects

exhaustively, we visited few project sites,


interviewed several people across levels
including project managers, contractors and
vendors, etc. To provide a holistic overview of
infrastructure industry, these projects have been
selected from different sectors, at different stage
of implementation and experiencing different
magnitude of schedule and cost overruns.

71 | Study on Project Schedule and Cost Overruns

CASE STUDY 1

NTPC Vindhyachal Stage IV1

FACTS

immediate corrective actions in case of any slippages


Delayed delivery of critical equipments and poor site connectivity are major
reasons for project delay
increase use of railways for equipment transport are some techniques used by

Introduction
2

and is located

Following are the key details of project


Capacity under installation
Location
Coal source

NCL mines

Water source

Station

Investment approval

Current project status

Project
completion date

Originally planned Anticipated/ Revised

Overrun

October-2012

2 Months

December-2012

Project cost
(INR Crore)
respondents

1
2

KPMG in India- PMI Survey on cost and schedule overrun, 2012


Coal Based Power Stations, NTPC Website, accessed 26 June 2012

NIL

Study on Project Schedule and Cost Overruns | 72

where the systems are nearing completion.

Unit 1
Sr.
No.

Milestone

Plan (as per


L2 schedule)

Original/
Revised
expected
completion

Nov-09

Mar-10

Apr-10

Jun-10

Mar-11

Jun-11

Sep-11

Nov-11

Nov-11

Unit 2
Actual/expected delay
(months)

Plan (as per


L2 Schedule)

Original/
Revised
expected
completion

Mar-10

Jun-10

Aug-10

Jan-11

Jul-11

Dec-11

Jan-12

May-12

Jan-11

Mar-12

Jun-12

Sep-10

Oct-10

Jan-11

Jun-11

Nov-10

Dec-10

Mar-11

Jul-11

Oct-11

Dec-11

Feb-12

Jun-12

Dec-11

Jan-12

Apr-12

Jun-12

10

Feb-12

Feb-12

Jun-12

Aug-12

Mar-12

Oct-12

11

Full Load

Actual/expected delay
(months)

73 | Study on Project Schedule and Cost Overruns

Project Monitoring & Reporting


system in place at the project site

DGM, P&S

monitoring and reporting team at site


Sr. Manager

Sr. Manager

which reports directly in to the Project


Dy. Manager

Dy. Manager

Dy. Manager

Sr. Engineer

Planning & Systems team is shown on

Reasons for project delay


and contractors on daily basis to collect
information on project progress and
updates reports which are circulated to

While an enterprise-level risk

the project team. Following reports are


generated for the purpose of reporting

carried out. No formal system of risk

Site connectivity:
very well connected with major

place at the project level. Following are

logistics and transport related issues.

Daily Progress Report (DPR):


DPR contains package-wise progress
as against monthly planned quantities.

roads connecting to the plant site


Material Delivery from BHEL:

package engineers and submitted

has separate section for work done in


users via SMS.
Weekly Progress Report (WPR):
WPR is package-wise report on
weekly work done as against monthly

in progress and resulted in delay of


critical milestones. Due to limited
not meet the supply schedule of
various concurrent projects under

longer transportation time affecting


the progress of the work.
Contractor Default:
mode and there are several small
and big contractors that are providing
material and services for the project.

State utilities. Due to spurring


one contractor that can lead to overall

information on work completed on


critical packages.
Monthly Progress Report:
monthly progress report contains
detailed project status report
containing information on the project

leading to a wide gap in demand and


supply of power plant equipments.

where the contractors had backed out.


Project Integration:
and hence the risk of integrating

forging and piping materials for power


plant equipments. Due to heavy order
honor their commitments in supplying
and this in turn severely affected the
manufacturing and supply schedule.
critical milestones and resulted in

Individual contractors will perform


their piece of work and will be
responsible for completing their
scope only. Any issues relating to
coordination between activities of two
contractors and ensuring performance

Study on Project Schedule and Cost Overruns | 74

Measures taken by NTPC to de-bottleneck project


1.
monitoring and reporting system in
place. Projects are monitored at micro
directly to their sub-contractors or at
times giving them advance payments.
the contractor bills and are helpful in
avoiding delays.
2.
railways to transport its material.

supplies of its different contractors

the requirements of one plant or


nearby multiple plants. If these trains
it is then transported to designated

any slippage and ensuring immediate


corrective action.

75 | Study on Project Schedule and Cost Overruns

CASE STUDY 2

GEVRA Expansion OCP (SECL)

FACTS

mine
-

and delay in getting regulatory approvals are major reasons for cost and time
overruns
has proactively prepared employment proposals and revised compensation

in Korba District of Chhattisgarh. It has an area of about 19 sq. km. and is the largest
open cast coal mine in India1

Following are the key details of project


Expansion capacity

mtpa

Location
Land Requirement

4184.5 Ha

Investment approval Date


Project cost
Target completion
respondents

Mineral Resources of Korba, Official website of Korba district, http://korba.nic.in/


kwMines.htm

Study on Project Schedule and Cost Overruns | 76

Background and current status

for augmentation of production by 2 mtpa was prepared and sanctioned by Coal India

Gevra mine capacity expansion plan

Source: KPMG in India PMI Survey on cost and schedule overrun, 2012; based on interaction with survey respondents

Need for expansion from 25 mtpa to 35 mtpa

production plan.

77 | Study on Project Schedule and Cost Overruns

Land Requirement

Note: - Values mentioned in green indicate that the land has been acquired.

Technology

Improvement in coal quality by selective mining


Minimum manpower required for operating the machines

any dust which could be generated during coal cutting

As on Dec 31, 2011

Study on Project Schedule and Cost Overruns | 78

Nature of contracts

Economic Valuation
According to initial project report dated

and using high capacity Shovel-Dumper


combination mechanism. At present
estimate for the project dated July 2007
was INR 780.12 crore. In September
balance is through conventional method
Coal mining is subcontracted to
various contractors / vendors who are

the actual estimates.


machinery for incremental 10 mtpa was

CHP & unloading of coal.


alone was estimated at INR 464.09 crore.

Milestone Status

S. No.

Milestone Description

1.
2.

Target Date of Completion


July 2005

Final Forest Clearance of 100.01 Ha land

August 2008
June 2009

4.

Commissioning of Workshop

March 2011

5.

Commissioning of Store

March 2011

6.

November 2006

7.

January 2010

8.

August 2010

9.

Construction of Haul Road

March 2011

10.

Construction of Residential Building

March 2012

11.

March 2012

12.
December 2012
14.

Augmentation of CHP including Silo

15.

Installation and commissioning of In-pit coal transport system

79 | Study on Project Schedule and Cost Overruns

Reasons for cost and schedule overruns


Increase in land compensation due
to policy change:- In the project

proposal no. 468 dated 11 July


2011

INR 41 crore per Shovel & increase of


-

was assumed as INR 7.00 Lakh per

and other P&M were based mainly


on the standard price list of mining
Ranchi.

acres. As per the revised Chhattisgarh

Delay in getting approvals from


State Government: - Approvals /

the rate was increased to INR 8.00


R&R etc. are pending with the State
increased by over 180 percent from
INR 27.8 crore to INR 78.27 crore.

Proposal for appointment of an


facilitated land acquisition.

acquisition of land.
Ambiguity over R&R Policy: employment to all the land losers
subject to availability of vacancies in

bottlenecks / delay factors in physical


that land losers who are not eligible
for employment shall be offered cash
compensation at the rate prescribed

Delay in Procurement of HEMM: -

Help to start with production from


Ministry of Rural Development
the only land left under physical
possession.

period of one year for manufacturing

the contracts through global

Utarda.

ambiguity in companys and State

Submission of Statement V &


VI of remaining villages under
acquisition.

the employment and compensation is


affecting the land acquisition.

Delay in getting internal approvals


(SECL Board): - Many of the

Procurement of specialized
equipment at a higher cost: - In the

Proposal for employment of


another 5 Nos. eligible candidates
of land looser was submitted to
HQ for approval vide letter No. 90
dated 12 April 2011

Compensation of houses and


Pondi village was submitted to HQ
for approval vide proposal no. 175
dated 14 June 2011

42 cum was considered to be INR


actual cost of procurement for each

Revised compensation of 172.719


Ha land of Pondi village was
submitted to HQ for approval vide

Study on Project Schedule and Cost Overruns | 80

Measures taken by SECL to debottleneck project


compensation / monetary package in
lieu of resettlement plot and building

1.
proactively prepared employment

request of the project owner allots


the land in the nearby area of the
provided.

the collector and obtained consent


with infrastructural facilities such
team proposed appointment of retired

handed over to the affected families.

land acquisition process.


2. In the case of ambiguity over R&R

resolved as soon as possible.

in nearby area of the project for

may be outsourced or cash

81 | Study on Project Schedule and Cost Overruns

CASE STUDY 3

Construction of an Offshore Container


Terminal at Mumbai Port Trust

FACTS

increase by 40 percent from scheduled cost


between dredging and berth construction works leads to schedule and cost
overrun.

of the

Construction details

Dock basin areas up to +4.79m CD by dredging sand available near Dharamatar


M/s Jaisu Shipping Co.

integrated development of the container yard and relocation of services.


Below are the major details of project
Capacity Addition
Location
Project Execution
Investment approval Date
respondents

Introduction, Mumbai Port Trust, http://mumbaiport.gov.in/index2.asp?slid=34&sublin


kid=10&langid=1, accessed 19 June 2012

Study on Project Schedule and Cost Overruns | 82

Current project status


Originally planned Anticipated/ Revised

Overrun

Project
completion date

Dec 2010

28 Months

Project cost
(INR Crore)

445

Dec 2010
610

Project Planning and current status


Agency

Planned date

Actual date

Delay in
months

Percentage of
work
completed

Dec 2007

Dec 2007

100

Financial Closure

June 2008

Nov 2008

100

Commencement of Construction

Aug 2008

May 2009

100

Description
License Agreement signed between

ICT

Completion of civil works and commission-

MbPT

Dec 2010

85

Handing over the site for trestle

Dec 2007

Dec 2007

100

Handing over already developed land at


Princes and Victoria Dock of the Licensed

Dec 2007

In phases

85

Completion of Capital dredging for the berth


pocket and handing over to the Licensee for
construction

Dec 2009

Apr 2012

28

100

Filling of Victoria Dock and handing over to


the Licensee.

Dec 2009

Dec 2012

85

Filing of Princes Dock and handing over to


the Licensee

Dec 2009

Dec 2012

85

Oct 2010

Mar 2012

Completion of Capital dredging for Approach

Dec 2010

17

55

28

83 | Study on Project Schedule and Cost Overruns

Project cost overrun


Agency

Description

Original estimate
(INR crore)

Actual/revised (INR
crore)

Increase (%)

589.6

Mechanical equipments and electrical & Fire Fighting


works

ICT

72.2

107.5

450

67.7

10.0

44.9

BPS investments

15.0

25.0

Contingencies

41.2

20.8

76.0

86.7

14.1

25.9

6.6

108.8

114

4.8

1,015.7

1,429.1

40.7

Capital Dredging

279.4

468.2

67.6

Filling

78.0

Debt service reserve


Interest during construction
Total

66.7

Dock closure works


Rail tracks for RCD

9.2

16.0

74.7

Relocation of underground services

0.7

0.7

MbPT
Navigational aids

Total
Grand Total

1.8
1.2

1.2

444.9

610.0

37.1

1,460.6

2,039.1

39.6

Study on Project Schedule and Cost Overruns | 84

Reasons for schedule and cost overrun


As a part
arranged by private concessionaire.
Due to 2008 global recession banks
put stringent norms for project

More dredging work than


estimated: Due to inaccurate
actual rock dredging quantity was
the estimates prepared by the
consultant were inaccurate resulting
leading to project schedule and cost
which has cascading impact on the
overall project delivery.
Slow mobilization by EPC
contractor:
actual work commenced only from

Delay in completing work by


dredging contractor: As per the

1.
system for construction activities.

milestones i.e. dredging in berth


P&V Dock basins by June 2010 and
dredging in approach channel by

of construction site
2.
independent engineer for design

missed the targets leading to delay of


achieving these milestones were as

operator. Due of regular monitoring

- Accident of MSC Chitra in Mumbai


Harbor resulted in suspension of
soil dredging by 28 days

engineers work only focuses on

- Delay in deployment of dredgers in


time by the contractor

to monitor interdependencies among


these two activities.

contractor
- Non-deployment of requisite
dredgers to meet the weekly

prepared by the consultants were


not appropriate leading to cost and
has instructed the HOD committee

the contractor
Lack of integrated project master
schedule:
two packages i.e. dredging and berth

Delay in project site handover:


project requires some work on the

Measures taken by MbPT/ICT to debottleneck project

suggest appropriate action against the


consultant for the lapse.
4. In lieu of non-compliance of the

have individual project schedule.


to make a single project schedule.

over of this area to the contractor by


5.
this period.
Delay in awarding dredging work
contract: Delay in tendering process
occurred as the eligibility criteria were

offers received from the contractors


necessitated revision in cost

engineer and project management


consultants to submit monthly
progress reports of the project.

works by the dredging contractor


has resulted in delayed handing over
6.
leading to overall project delay.
Delay in obtaining security
clearance:
for the bidder was received after a
period of 18 months from the Central

all infrastructure works like Capital


scope of work.
7.
one activity into other i.e. dredging

project delay.
interdependencies of works by

85 | Study on Project Schedule and Cost Overruns

CASE STUDY 4

Installation of FCCU at Mumbai Refinery

FACTS

Project was delayed by one year and three months years and completed within
the budgeted cost
of skilled manpower are some factors that leads to schedule and cost overrun
negotiation with vendors.

Following are the key details of project


Capacity under installation
Location
-

Contract Type
Investment approval

March 2007

respondents

Project Description

FCCU Feed Section consisting of feed Pre-heaters & Furnace

Fuel gas treating section

Study on Project Schedule and Cost Overruns | 86

Project Planning and current status


Originally planned Anticipated/ Revised

Overrun

Project
completion date

September-2009

December-2010

15 Months

Project cost
(INR Crore)

900.47

900.47

NIL

respondents

allocated budget. Following are the major milestones planned with their actual

Project Planning and current status

Process

Milestone Description

Planned Date

Actual Date

Issue of equipment data sheets

16 August 2007

16 November 2007

Issue of P & ID's & line list for engineering

17 September 2007

26 December 2007

Issue of complete process package FCCU

01 October 2007

26 December 2007

Issue of P & ID's & line list for utility


distribution

15 October 2007

05 February 2008

Prepare and issue P&ID's and line list for


utilities/offsites

Delay
(in months)

2.9

01 February 2008
01 October 2007

29 November 2007

2
5

29 February 2008

11 April 2008

01 September 2008

10 November 2009

15 October 2008

18 September 2009

Prepare main air blower

01 October 2007

26 December 2007

2.9

Prepare fractionator column

04 October 2007

06 November 2007

1.1

Issue LOI for main air blower

01 February 2008

29 April 2008

2.9

Issue LOI for fraction Column

05 February 2008

08 February 2008

19 February 2008

02 April 2008

Engineering

1.4
14.5

1.4

Ordering
Issue LOI for vessels

04 March 2008

Issue LOI for DCS

24 October 2008

Issue LOI for Burner

14 October 2008

4.5

87 | Study on Project Schedule and Cost Overruns

Milestone Description

Planned Date

Manufacturing and delivery at site - Flue


gas cooler
Manufacturing and delivery at site -

Manufacturing
and Delivery

Actual Date

Delay
(in months)

09 April 2009
20 January 2009

04 September 2010

19.7

Delivery at site - Slurry Pumps

06 February 2009

25 September 2010

19.9

Manufacturing and delivery at site - Wet


gas compressor

27 February 2009

Manufacturing and delivery at site Fractionator Column

04 April 2009

14.0
6.0

Manufacturing and delivery at site DCS 29 April 2009


Delivery at site Burner

01 April 2009

22 October 2009

Manufacturing and delivery at site - Main


01 June 2009
air blower

19 August 2008

clearance

6.8

7.7

15 March 2010
Civil work for sub-station complete

29 April 2009

Installation of wet gas compressor


Fabrication & erection of heater

29 July 2009

25 March 2010

11

06 May 2009

10 June 2010

10.5

Construction
Installation of DCS

15 September 2009

1.5

Completion of scrubbing unit work

16 December 2010

16.8

05 August 2009

Complete electrical and instrumentation


work

29 September 2009

15 December 2010

14.7

Mechanical completion

29 September 2009

16 December 2010

14.8

Study on Project Schedule and Cost Overruns | 88

Reasons for Schedule Delay

project scope was changed during the

Delay from vendors and contractors:


Many of the critical equipment supplies
were delayed from the contractors and

project scope was changed on following

equipments were delayed affecting the

Change in Project Scope: Due to lack of

Delay in shifting of existing facilities:

make site ready for construction. Delay

Delay of 15 months in delivery of


to project schedule

Other factors: Other factors which were


not considered during project planning

Delay of 14 months in delivery of the


BHPV

conditions from July to September


activities

80 percent detailed engineering


milestone and delay of 15 to 16
months with respect to critical
estimated 24 months
A number of improvement measures
were initiated during the course of
the project implementation including

Shortage of skilled manpower such


as piping engineers at the contractor
side.

cascading impact on procurement and


construction
Deliveries of balance lose items for

implementation of catalyst cooler


Completion of Catalyst Cooler
November 2010.
which were not planned in original
project plan.

Measures taken by HPCL to debottleneck project


1. One of the reasons for schedule
overrun was delay from vendors
of recovery plans and innovative
measures were implemented. For
management and project team
initiated a series interactions with
senior management of equipment

the challenges and decide on the


corrective measures.
2. HPCL project progress was closely
monitored by the project team and the
critical issues were escalated to the
the issues were even escalated to the

so that drawings were released on


priority basis in line with the sequence

89 | Study on Project Schedule and Cost Overruns

CASE STUDY 5

Expansion and Modernization of NSCBI


Airport

FACTS

critical factors that leads to schedule overruns.

India Limited.

Following are the key details of project


From 9.6 million passengers to 20 million passengers annually

Capacity expansion
Location
Investment approval date

August 2008

respondents

Project Planning and current status


Originally planned Anticipated/ Revised

Overrun

Project
completion date

August 2011

14 Months

Project cost
(INR Crore)

1942.5

October 2012

respondents

Traffic News, Airport Authority of India; KPMG in India Analysis

Study on Project Schedule and Cost Overruns | 90

Project Milestones

Task Name

Start Date

Actual/Expected
Finish Date

Construction of Integrated Passenger Terminal Building (NSCBI, Kolkata)

November 2008

March 2012

November 2008

March 2012

November 2008

March 2012

November 2008

February 2010

November 2008

September 2011

March 2009

July 2011

May 2009

December 2010

May 2009

March 2010

November 2009

December 2010

March 2009

July 2011

March 2009

July 2010

October 2009

July 2011

October 2009

September 2011

October 2009

September 2011

October 2009

September 2011

Arrival Lower Level

October 2009

November 2010

Arrival Upper Level

January 2010

January 2011

Departure Lower Level

April 2010

March 2011

Departure Upper Level

January 2011

September 2011

May 2009

September 2011

Domestic

February 2010

September 2011

International

May 2009

September 2011

December 2010

December 2011

Faade

February 2011

October 2011

Road Work

May 2009

December 2011

Wood Work

April 2010

December 2011

April 2010

November 2011

September 2010

December 2011

April 2010

December 2011

September 2010

December 2011

April 2010

December 2011

November 2009

July 2011

RCC Floor Slab

November 2009

December 2010

RCC Middle Level

July 2010

April 2011

August 2010

July 2011

Preliminaries
Earthwork
International Terminal

Domestic Terminal

Structure
RC Superstructure
International Terminal

Steel Structures

Internal Finishing

Car Park

91 | Study on Project Schedule and Cost Overruns

Task Name

Start Date

Actual/Expected
Finish Date

External Finishing

August 2010

December 2011

MES Work

August 2010

December 2011

August 2010

November 2011

April 2011

December 2011

Fire Fighting

November 2010

December 2011

HVAC

October 2010

December 2011

November 2010

November 2011

November 2010

December 2011

July 2011

September 2011

Reasons for Schedule and Cost Overruns


Delay in handing over of the site: At the
of land was handed over to the contractor.

be handed over to the contractor for


stacking of construction materials and
fabrication / structural steel works
constitutes a major part of the job.

Work-to-rule agitation: Protest from

taken around 60 engineers off the


delay in required removal or demolition
overrun.
Inaccurate DPRs and ineffective
planning:
on the relocation of critical facilities such
conditioning plant and generator room
which were stationed in an old building
and needed to be demolished under

steel structure were stacked in noncontiguous and scattered sites around


the Airport premises causing logistics
problem and delay in fabrication work.
Delay in completing security clearance
inside operational area
Pending revised budget approval
from PIB, leading to delay in awarding
packages: Due to cost escalation of

the demolition of the old structure was

was overrun by 20 percent. A revised


cost estimate was submitted to Public

Shortage of land at construction site


for stacking of construction materials:

approval is awaited2. Due to budget


constraint there is delay in awarding the
contracts.
Delay in obtaining approvals: NSCBI
Airport received late approval from State

domestic terminal building and other


allied structures due to which no land
contiguous to the work site could

As on September 2011

a delay in removal of encroachments by


State municipality.

major reasons for pushing the project


completion date from March 2012 to
October 2012.

Measures taken by AAI to


debottleneck project
1. Chairman of AAI was himself involved
and had meetings with the leaders
of protesting employees. It was only
after his assurance agitation was
suspended.
2. Along with in-house Project
Monitoring & Quality Assurance
independent consultant to ensure the
quality of construction work.

Study
Bridging
on the
Project
Urban
Schedule
Housing
and
Shortage
Cost Overruns
in India | 92

Common risks and suggestive


there are common factors impacting the
project delivery across these projects
whereas the risk are peculiar to each
adopt different approaches to overcome

Develop Integrated Project


Delivery Schedule

as an interface between project site and


delivery.

contractors are carrying out different

overall project completion. Based on our

its own schedule which is generally


not integrated to make a single project

few suggestions that can be addressed


by project owners to help rule out key

based on individual schedules. In this

Buy-in from execution team on


project schedule

effect will not be seen on activities of

the planning stage

conduct detailed risk assessment at the

stake holders that could impact project


project has risks around timely supply
from equipment supplier and NSCBI
airport has risk related to constructing a

important to have one a single integrated


project schedule encompassing the
schedule has to be updated frequently to
monitor overall project status.

Build power partnership with


vendors
Delay in getting equipments from
suppliers/contractors is another reason
which impacts the project delivery.
Building a long term relationship with
vendors could help in timely delivery of

is need to do a very detailed analysis of all


of project by project owners and the
be formally documented and monitored
bottlenecks and taking corrective actions.

Holistic view of regulatory


approvals
Majority of projects faced hindrances in
need to include approvals process and
timelines. Any deviation in achieving
these timelines should have a suitable

the concerns and they mutually agree on


the corrective actions.

Enhance monitoring agency (PMO)


to monitor the progress and
bottlenecks on regular basis
Most companies have an in-house
system of monitoring project progress.

side there is a need to make approval


and clearance processes smooth by
introducing innovative measures such as
single window clearance.

could help in monitoring the project


progress and identifying bottlenecks in an

accountability of the timelines given in the


signed off by all agencies after agreeing to
the timelines given for their activities.

93 | Study on Project Schedule and Cost Overruns

SECTION

10

Study on Project Schedule and Cost Overruns | 94

Global
insights
Learning from
global projects

Although building infrastructure projects is a


global challenge today, the sector is expected to
experience an unprecedented level of investment
and expansion in infrastructure around the world.
An estimated USD 40 trillion of investment would
be needed by 2050 to sustain the global growth1.
To understand the infrastructure challenges
and how industry is preparing to overcome
them, KPMG International conducts Global
and views of the worlds leading engineering
and construction companies. This survey also
highlights that while the intensity of some issues
is same across the globe, others have more
impact in a particular region or country.
1

KPMG Internationals publication Insight The global infrastructure magazine,


November 2010

95 | Study on Project Schedule and Cost Overruns

Challenges of global construction


industry
Project delays and cost overruns is a
global phenomenon and India is no

Reasons for schedule delay globally

remedies differ from country to country.


lack of approvals have been regarded
as the main causes of delays across the
globe. Contractual disputes also impact
the project schedule although none of the
global construction survey respondents
from the Americas region cited this as
contracts are tied down more tightly in
this region.
Skill shortage is another issue impacting
the implementation of infrastructure
projects. 84 percent2 of the respondents
felt that the construction industry is not
doing enough to tackle skills shortages.

is both a reaction to local shortfalls and


a natural consequence of the increased
mobility of people.

construction is very high on the agenda


of project owners. Nearly all surveyed
companies have an environmental

Note: Respondents could answer more than one option


Source: Global Construction Survey 2008, KPMG International

Reasons for cost overrun globally

responsibility in over two-thirds of cases.

presenting a green image to stakeholders

respondents agree that there are multiple

a management system to set appropriate


key performance indicators to measure
sustainable performance. Inability to
deliver sustainable infrastructure projects
can have dire consequences for the
developers reputation.
Note: Respondents could answer more than one option
Source: Global Construction Survey 2008, KPMG International

Global Construction Survey 2008, KPMG International

Study on Project Schedule and Cost Overruns | 96

Leading practices followed in the construction industry


Sophisticated approach to risk
management - With growing

Preferred partnership with suppliers formal or informal partnering agreements

management is emerging as one of the


key imperatives for project management.
Leading companies of the world
apply holistic approach where risk is fully
integrated into every aspect of the project
life cycle. Rigorous analysis is done at the
planning and bidding stages as part of
owners consider and evaluate factors
that may have a direct or indirect impact
on the project such as macro-economic

90 percent of respondents had some


preferred partnerships with their
contractors and suppliers . Preferred
partnerships not only helped companies
to get reduced prices but also guaranteed
gain priority attention for critical projects
and reduce contractual claims.
Talent management is one of the top agenda for infrastructure

is put in place to seek a more objective


review of projects by dedicated risk

best people during adverse conditions.


of the respondents believed that their
systems and controls were fairly or very
investment in risk management over a
number of years.

an improved salary and career structure.

Were entering into more strategic


partnerships and joint ventures when
executing larger projects, in order
to spread the risk and leverage key
strengths
Survey respondent, United States
Global Construction survey 2009,
KPMG International

We try to identify key staff early and


give them job rotation and training
opportunities.
Survey respondent,
Europe, Middle East and Africa region
Global Construction survey 2009,
KPMG International

97 | Study on Project Schedule and Cost Overruns

Cost escalation management: In


a world where costs are constantly

Reasons for schedule delay globally

are carefully managing all elements of the


their productivity. Companies employ a
variety of techniques to manage rising

the supply chain and hedging vital


commodities.
Contract clauses: Due to uncertainty

Note: Respondents could answer more than one option


Source: Global Construction Survey 2008, KPMG International

are increasingly using contract clauses


companies choose to be transparent
by referring to publicly available cost
indices in their contracts. According to

claim to practice this for the majority of

these types of contracts are preferred


owners are willing to share these risks by
agreeing to contract clauses that cover
rising costs.

KPMG in Indias
point of view
Majority of reasons that lead to project cost and schedule overruns in India are not

world in terms of project delivery.

Study on Project Schedule and Cost Overruns | 98

99 | Study on Project Schedule and Cost Overruns

SECTION

11

Study on Project Schedule and Cost Overruns | 100

Sector
snippets

101 | Study on Project Schedule and Cost Overruns

Petroleum
Indias demand for oil & gas is continuously increasing, though the
indigenous production is almost stagnant, leading to increasing
imports
Major sector players are ONGC, IOCL, BPCL, HPCL, OIL, GAIL, RIL,
Essar1
controlled price regime are some of the key challenges.

Sector Overview
India is the fourth largest consumer of

Petroleum products and natural gas consumption

around 40 percent in Indias primary


energy consumption2.
.

the same period the production of


natural gas has increased at 6.7
BCM5.
consumption of petroleum products
increased at 4.6 percent p.a and gas
5

Source: Historic consumption of petroleum products and natural gas, Petroleum planning and analysis cell (PPAC),
accessed June 2013

1
2
3
4
5

India Oil & Gas sector competitive landscape, BMI, 11 December 2012
BP statistical review of world energy 2012, June 2012
Handbook of Statistics on Indian Economy, Reserve Bank of India, June 2013
Installed Refinery Capacity, PPAC, accessed June 2013
Historic production of petroleum products and natural gas, (PPAC), accessed June 2013

Study on Project Schedule and Cost Overruns | 102

Five year plans performance

Planned expenditure vs Actual expenditure

Oil and gas is one of the few sectors

mainly because of aggressive investment

approved outlay6.
* XI plan actual expenditure is only up to August 2009
Source: Planning commission

Emerging Trends

Key Challenges
1. Slow pace of exploration activities:

time.
2.

Most of the

4. Risk of natural gas infrastructure


not being laid down: Due to low

1. Exploration activities:
investment in upstream activities

entered in to the business and now


they might not lay the gas pipelines.
Further some new companies that
have entered in the gas business
dont have requisite capabilities to lay
infrastructure.

are witnessing a declining production.

blocks .6
2. Unconventional sources: India
has huge potential to develop
unconventional sources of
hydrocarbon including Shale gas and

decline.
3. Underutilization of existing natural
gas infrastructure: Natural gas

primarily due to constrained domestic


supply of natural gas.

Five Plan8
3. Fuel prices: Petrol prices have
been decontrolled with effect from
June 2010 and there are plans to
decontrol diesel prices as well.
on a mechanism of direct transfer of
9

6
7
8
9

Seventh to Eleventh Five Year Plans, Planning Commission


Directorate General of Hydrocarbon (DGH)
India to launch shale gas exploration bid during 12th Plan, Indian Express, dated 22
November, 2011
Poor consumers may get cash subsidy on LPG, kerosene and fertilizers, Economic
Times, 6 July 2011

103 | Study on Project Schedule and Cost Overruns

Power
With substantial addition in power generation capacity, peak power
Major sector players are NTPC, NHPC, PGCIL, PTC, Tata power,
Lanco Power1
Slow pace of project execution, shortage of power equipments,
delays in land acquisition and regulatory approvals are some of the
key challenges.

Sector Overview
Indias power demand and supply
is continuously increasing. During

Peak power demand supply in India

capacity for power generation was

and the remaining 15 percent is


other renewable sources of energy .

Source: Power Scenario at a Glance, Central Electric Authority, 2013

1
2
3

India power sector competitive landscape, BMI, 4 January 2013


Power Scenario at a Glance, Central Electric Authrotiy, June 2013
Installed Generation Capacity, Central Electric Authority, April 2013

Study on Project Schedule and Cost Overruns | 104

Five year plans performance

Planned target vs actual achievement

fallen short of achieving the planned

half of the planned capacity addition.


look better and according to mid-term
around 80 percent of the targeted
capacity addition.
addition targets are much higher from
the previous year achievement. For
is around four times then the actual
capacity additions achieved in tenth plan.
Participation from the private sector is
also increasing mainly due to favorable
reforms.

Source: Power Scenario at a Glance, Central Electric Authority, 2012

Key Challenges

Emerging Trends

1. Delay in project execution: India


has been failing to meet the capacity

1. Power Reforms:
taken several steps to promote
investment and private sector
participation in the sector. Some of
the major reforms that have been

around 70 percent4 of the planned


target capacity addition was met.

3. Promotion of renewable energy


for power generation:
is promoting renewable energy for
power generation to meet the dual
challenges of energy security and
potential for solar energy and to tap
this potential the Jawaharlal Nehru

2. Shortage of fuel availability: Power


in securing fuel supply primarily due
to lack of good quality domestic
limitation in domestic gas supply.
3. Delay in land acquisition and
environment clearances: Absence of
single window clearance mechanism
results in delay in acquiring land
thus leading to a prolonged predevelopment cycle.

Power Development and Reform


6

rise to new opportunities for power


players especially in the power
generation space.
2. Increased private sector
participation: As a result of favorable
there have been a plethora of new
projects announced by the private

4. Shortage of power equipment:


private sector in total electricity
generation has grown rapidly from

for this mismatch is the equipment


manufacturers were unable to keep
pace with increasing generation
capacity.

to further increase to 50-60 percent


5
.

5
6

Mid-term appraisal of Eleventh Five Year


Plan, Planning Commission
Tenth and Eleventh Five Year Plan, Planning
Commission
PM launches Jawaharlal Nehru National Solar Mission
Solar India, Press Information Bureau, 11 January
2010

105 | Study on Project Schedule and Cost Overruns

Coal

sectors, the gap between the demand and supply of coal is widening
Major sector players are CIL, SCCL1
Slow pace of exploration, lack of evacuation infrastructure and
environmental concerns are some of the key challenges.

Sector Overview
India is the third largest producer

Coal production and consumption

about 5.6 percent of the total global


production2.
primary energy consumption is
sourced through coal .
recoverable coal reserves stood at
about 118 bt are proved reserves4.
consumer of coal in India accounting
for about 75 percent of the total
coal consumption1. Other segments

Source: Ministry of Coal

1
2
3
4

India mining sector competitive landscape, BMI, 26 October 2012


BP Statistical Review 2012, June 2012
Ministry of Coal
Ministry of Coal

Study on Project Schedule and Cost Overruns | 106

Five year plans performance

Planned expenditure vs Actual expenditure

sector was able to achieve the planned

year plans has been disappointing. For

has revised its planned outlay of INR

reason behind this is the monopolistic


role of the State owned players in the
Indian coal sector5.

* XI plan actual expenditure is only up to August 2009


Source: Planning commission

Key Challenges
1. Slow pace of exploration activities:
Of the total recoverable coal

5. Environmental concerns:

3. Widening demand-supply gap:

has led to a number of environmental

increasing mainly driven by the new

dominance of open cast mining


techniques in India as the production
from using such techniques can start
in short span of time.

indigenous production is not able to

indicated and the inferred category6.

sector.
2. Socio-environment issues:
coal reserves lie in the forest areas
in such sensitive areas poses a
environmental clearance and forest
clearance processes for project
implementation is generally slow.
3. Lack of Competition:
sector is predominantly monopolistic

India has been increasingly importing


Emerging Trends
1. Captive mining for coal: Captive
mining for coal is gradually increasing

whose involvement in the countrys

India and other State owned miners.


independent regulator in this sector.

2. Efforts for technology


enhancement: Indian coal miners are

evacuation infrastructure needs to be


transportation.

44 percent increase over imports of


68.9 million tons in 2010118.

coal blocks with reserves of 45.89


billion tonnes have been allocated for

have been allocated 100 blocks with


7
.

4. Inadequate evacuation
infrastructure: Coal sector primarily
depends on rail evacuation for off-take
and delivery of coal stocks. With

has created a demand supply gap

in an attempt to enhance technology


and ensure productivity gains. Indian
players are also warming up to
collaborate with the foreign partners
projects in the sector.
5
6
7
8

Seventh to Eleventh Five Year Plans, Planning


Commission
Ministry of coal
2011 India Energy Handbook
Coal Imports, Press Information Bureau,14 May 2012

107 | Study on Project Schedule and Cost Overruns

Steel

India has surplus iron production and is a net exporter of steel


Major sector players are SAIL, TISCO, JSW, Essar1
Hindrances in land acquisition, depleting iron ore reserves and
shortage of raw materials are some of the key challenges.

Sector Overview
India has become fourth largest
producer of crude steel in the world

Finished steel production and consumption

second largest producer by 20152.

million tonnes .
Although the per capital steel use has
kg in 2010-11
compared to the world average of
about 215 kg .
segment was the largest consumer
61 percent of the total consumption4.
Other major segments include
manufacturing and automobile
industry.

1
2
3
4

Source: Annual report 2011-12, Ministry of Steel

India Metal sector competitive landscape, BMI, 25 May 2012


Annual Report 2011-12, Ministry of Steel
Ministry of Steel
IBEF Report

Study on Project Schedule and Cost Overruns | 108

Five year plans performance

Planned expenditure vs Actual expenditure

After achieving only 40 percent and 44


percent of the planned outlay during
the steel sector has posted a strong

achieved about 80 percent of the planned


main reason behind this is the aggressive
spending by the steel companies for
5
.

* XI plan expenditure during April 2007-December 2010


Source: Planning commission

Key Challenges

Emerging Trends

1. Hindrances in land acquisitions:


Land acquisition is a sensitive issue
in India. Land acquisition approvals
often take a long time in the country

1.

the environmental clearances also


generally take longer than stipulated
time in the country.
2. Shortage of raw materials:
steel manufacturers often face the
shortage of raw materials especially
coal and natural gas in India. India is
an importer of high grade coking coal
which is a major feedstock for the
steel sector.
3. Depleting iron ore resources: India
has limited resources of iron ore.
Moreover the iron ore resources are
depleting fast in the country.
4. Lack of adequate infrastructure:
While the coking coal is imported
the steel manufacturing plants are

burden in their transportation costs.

5
6

Seventh to Eleventh Five Year Plans, Planning Commission


IBEF Report

In
view of the surge in steel demand in
projects have been initiated in the
recent past to increase the production

an annual average rate of over 10


percent till 2014 and would require
production capacity6.
2. Efforts for technology
enhancement: Indian steel
manufacturers are warming up to the
application of advance technologies

injection in the production processes.


Both public and private sector players
are also increasing their R&D budget
with focus on introduction of advance
technologies.

3. Mergers and acquisitions:


Indian steel industry has witnessed
a number of major merger and
acquisition deals in the recent past.

109 | Study on Project Schedule and Cost Overruns

Ports

percent in 2005-06 to 40 percent in 2011-12


Major sector players are Government authorities, Adani Group, DP
world, APM Terminal1
Slow pace of development, lack of integrated approach and highly
congested ports are some of the key challenges.

Sector Overview
Indias port sector handles about 95
percent of Indias total international
cargo by volume and about 70 percent
by value2.
of major ports has been reducing in
growth terms when compared to non-

while that at non-major ports has been


difference of over 10 percent .
2020 aims to increase the psort

Source: Indian Ports Association, Crisil, KPMG in India analysis

then

90 percent to about 80 percent5


reducing port congestion.

1
2
3
4
5

India port sector,BMI, accessed 4January 2013


India in Business, Ministry of External Affairs
Indian Ports Association, Crisil; KPMG in India analysis
Ministry of Shippings Maritime Agenda 2010-20
Indian Ports Association, Crisil; Maritime Agenda 2010-20; KPMG in India analysis

Study on Project Schedule and Cost Overruns | 110

Five year plans performance

Planned expenditure vs Actual expenditure

plans was critically unfavourable with

target in the port sector is reduced to INR


6

Source: Planning commission

Key Challenges

Emerging Trends

1. Delay in Infrastructure
development: It has been observed
that of the 276 port projects
envisaged under National Maritime

1. Capacity addition:

development of port projects

In terms of overall cargo handled in

2. Change in International trade


pattern:
its trade pattern from traditional
dominance of the US and Western

2. Lack of integrated approach:


Standalone initiatives by various
ministries results in lack of master
plan approach for development of
mega projects.

of eastern major ports has been


overtaken by western major ports.
handled at western major ports

eastern major ports increased at a


10

has been witnessing a different


growth story. In terms of absolute

3. Over port utilization levels:


90 percent as against the global

turnaround time and hampering global


competitiveness of most of Indian
major ports.

6
7
8
9
10

Seventh to Eleventh Five Year Plans, Planning Commission


Crisil research
Crisil research; KPMG in India analysis
Ministry of Commerce, KPMG in India analysis
Indian Ports Association, Crisil, KPMG in India analysis

share of developed markets such as


either remained same or decreased
to half of their respective levels during
the same period9.
3. Changes in Cargo Handling:
Indian maritime sector has been
witnessing the following major

pie of around 885 million tonnes.

tonnes6.

111 | Study on Project Schedule and Cost Overruns

Railways

Railways is the principle mode of transportation for freight and


passengers
Indian Railways enjoys a near monopoly position in the country
Highly congested network and frequent Government interventions
are some of the key challenges.

Sector Overview
been increasing from about 6.2 billion

Rail freight and passenger movement

increasing from 728 million tonnes

percent1.
Coal is the leading commodity
transported through railways and
in 2010-11 its share in total rail
freight is around 46 percent2. Other

kms of new lines in the period 20102020 .

1
2
3

Ministry of Railways, KPMG in India analysis


Crisil research; KPMG in India analysis
Indian railways, web search

Source: Ministry of Railways

Study on Project Schedule and Cost Overruns | 112

Five year plans performance

Planned expenditure vs Actual expenditure

in the railways sectors have been very

percent in the Seventh Plan. In the

cent lower than the earlier projection of


and private investments are below the
investment envisaged in railways is INR
4
.

Source: Planning commission

Key Challenges

Emerging Trends

1. Infrastructure challenges: Railway

1. Role of PPP: With the entry of private

3.
infrastructure: Keeping an eye on the

especially in areas that are critical


competitiveness among public versus

. In

2. Focus on metro rail: While currently


very few cities such as Delhi and

Hyderabad and Lucknow are currently

the competitiveness of railways.


3. Regulatory challenges: Increasingly
frequent interventions by Indian
railways in determining pricing
hindered the business potential that
private players have been envisioning
been the case with private investors.

policy governing private participation


is still evolving.

private players is gradually resulting in


competitive offering to end users.

is not modern yet.


2. Lack of reliable freight
transportation services: Lack
of tracks dedicated to freight
transportation and low priority
accorded to freight trains vis--vis to
passenger trains have been resulting
in rail being usually considered as
slow and unreliable transportation

two Dedicated Freight Corridors

4
5
6
7

Seventh to Twelfth Five Year Plans, Planning Commission


Indian railways, city metro authorities, web search
Ministry of Railways, web search
DFC website, KPMG in India Analysis

million tons annually by 2021-227.

113 | Study on Project Schedule and Cost Overruns

Civil Aviation

Major airport developers are AAI, GVK, GMR1


High capital requirements, increasing security concerns, lack of
skilled manpower are some of the key challenges.

Sector Overview
been playing an increasingly critical
role in the overall scheme of air-based

Air freight and passenger movement

or passenger movement.
million tonnes in 2006-07 to about 2.2

has increased from about 96 million


to 159 million during the same period
2
.

accessories and perishable items.


Changes in regulatory space have
the currently discussed policy
guidelines on allowing foreign carriers

plethora of investment opportunities.

1
2

India airport sector, BMI, accessed 3 January 2013


Crisil, Airports Authority of India, KPMG in India analysis

Source: CRISIL, AAI, KPMG in India analysis

Study on Project Schedule and Cost Overruns | 114

Five year plans performance

Planned expenditure vs Actual expenditure

only segment within transportation


infrastructure that has witnessed

versus the planned allocation. With the

envisaged at the commencement of the


allocation has been increasing manifold in
allocation increased from less than INR

total investment in airport infrastructure.

.
Source: Planning commission

Key Challenges

Emerging Trends

1. Lack of skilled professionals:


Shortage of skilled manpower in

1. Increase in infrastructure
investments:

percent of the investments would be

civil aviation sector.


2. Financial constraints: With
there is a need for latest technologies
and infrastructure at the airports

3. Infrastructural constraints: Civil


aviation operations being assetthe capital cost under control is an
immense challenge. Lack of long
additional land availability for further
impact the prospects of civil aviation
infrastructure as demand grows
land acquisition and environmental
concerns are likely to become all the
more critical in the years ahead.

3
4

Seventh to Twelfth Five Year Plans, Planning Commission


Airport Authority of India, Crisil Research

3. Increase in Other Growth Avenues:


Opportunities in general aviation

2.
airports:

percentage of their services to routes


a surge in leisure and medical tourism

internationally and provide direct


connectivity to non-metro tourist

at a fast pace with growing bottomline of corporate and high net worth
individuals.

115 | Study on Project Schedule and Cost Overruns

Roads
With expansion of highways and rural roads, the demand for road
freight has increased
Major players in road construction sector are NHAI, L&T, Reliance1
Delays in project execution and sub-optimal infrastructure for
maintaining roads are some of the key challenges.

Sector Overview
Road freight

given that the share of highways


in domestic freight movement has
jumped from a low of 11 percent of
82 million tonnes in 1950-51 to 61
2007-082.
been growing from 621 btkm in 2005.
While the National Highways
constitute a meager 2 percent of the
to about 40 percent of the total road
freight4
underlining the need for constant
maintenance and addition of new
highways.

Source: CRISIL, KPMG in India analysis

are taking several majors measures


to promote private participation in
construction/maintenance of State
roads.

1
2
3
4

India road sector, BMI, accessed 4 January 2013


IDBI Capitals Railways Sector report 2010, KPMG in India Analysis
Crisil, KPMG in India Analysis
KPMG in Indias report Adding Wheels

Study on Project Schedule and Cost Overruns | 116

Five year plans performance

Planned expenditure vs Actual expenditure

this trend got reversed in the last latest


the fact that planned investment in
beginning of the plan was over INR
what was planned for the Seventh plan.

from original projections5


in investment is due to a shortfall in the
award of road projects by NHAI during

Source: Planning commission

Key Challenges

Emerging Trends

1. Delay in execution of projects:


Persistent issues in land acquisition
and environmental clearance have

1. Focus on development of
expressways:
witnessing increased focus on

majority of cash contract project.


Average time overrun has been about
22 months6.

attempt to provide dedicated road


connectivity between near-placed
important cities. A total of around

2. Sub-optimal infrastructure: Factors


such as lack of timely and quality

integrated-cum-automated toll
congestions and frequent violation

National Highway Development

be carried by a truck result in suboptimal road infrastructure and freight

during 2010-156.

reduced average speed of trucks and


other commercial vehicles.

5
6
7

2. Increase in opportunities: Most


of the projects under Phase III

Seventh to Twelfth Five Year Plans, Planning Commission


CRISIL Report on Road Sector, 2010
Seventh to Eleventh Five Year Plans, Planning Commission

3. Increasing demand for extensive


road network: Increasing demand
in tier 2 cities is creating multiple
consumption hubs instead of the
conventional demand islands in
resulting in the need for improved

retailing is increasing the need for last


mile reach which is feasible only via
been driving the development of State
and rural roads.

117 | Study on Project Schedule and Cost Overruns

Telecom

though the average revenue per user (ARPU) remains at a low level
compared to global average
Major sector players are BSNL, MTNL, Airtel, Vodafone, Idea1
High competition, infrastructure bottlenecks and Government
regulations are some of the key challenges.

Sector Overview
market has continued to show
consistent growth with total
subscribers reaching more than 898

Telecom subscriber base

Wireless subscribers contribute more


than 867 million with a tele-density of
more than 70 percent2
Urban wireless market is reaching
saturation with a tele-density of more
market has lot of potential with a teledensity of 40 percent only2
Indian telecom service revenues are
.
Source: DOT - Annual Report, 2010-2011; Economic Intelligence Unit, 2012

1
2
3

India telecommunication sector competitive landscape, BMI, 18 December 2012


Telecom Subscription Data, TRAI, March 2013
Telecom outlook, Crisil Research, April 2013

Study on Project Schedule and Cost Overruns | 118

Five year plans performance

Planned expenditure vs Actual expenditure

phenomenal and this sector mostly


outperforms its investment targets as

achievement is due to a 60 percent higher


level of investment by the private sector
as compared to the original projections4.
Competition in this sector has been quite
to the economy and the users through
improved quality of service at lower costs.

Source: Planning commission

Key Challenges

Emerging Trends

1. Intense Competition: Presence of

1.

4.
started the price war over tablets and

resulting in very low ARPU levels.


contributing to ARPU uplift6.
players.

2. Mobile Number Portability has

2. Regulation: Delay in revision of


service quality.
uncertainty in the sector.
3. Infrastructure Bottleneck: Network
network infrastructures in rural areas
remain limited.
4. Low Broadband Subscriber base:
Despite huge investments in the
broadband subscriptions remains very

compared to the target of 40 million


and 20 million by 20105.

4
5
6

Seventh to Eleventh Five Year Plans, Planning Commission


Performance Indicator Report , TRAI, December 2011
India Strategy, Motilal Oswal, January 2011

short term on account of the high


telecom players as well as the

in investment is not likely to stunt


growth with leading operators having

services and hence the data services.

119 | Study on Project Schedule and Cost Overruns

SECTION

13

Study on Project Schedule and Cost Overruns | 120

Participant
methodology

121 | Study on Project Schedule and Cost Overruns

Survey responses were gathered through a face-to-face interview followed by a detailed questionnaire

industry and clients.

Percentage of respondents across sectors

Project Capital cost (INR Crore)

Study on Project Schedule and Cost Overruns | 122

Project duration (years)

Participants company turnover (INR crore)

123 | Study on Project Schedule and Cost Overruns

SECTION

12

Study on Project Schedule and Cost Overruns | 124

Appendix

125 | Study on Project Schedule and Cost Overruns

Summary of Projects - Sector Wise


Road trasport and highway have maximum number of ongoing projects
Sectoral break up of on-going infrastructure projects in India

Source: MOSPI, December 2012 Flash Report

Power sector projects have highest value


Value Wise breakup for all ongoing projects

Source: MOSPI, December 2012 Flash Report

Study on Project Schedule and Cost Overruns | 126

Sector level Schedule and Cost overruns


Sr. No.

Sector

Projects with
Schedule overrun

Number of
Projects

Original
Cost (in Rs.
Crore)

Anticipated cost
( in Rs. Crore)

Cost overrun
percentage

Atomic Energy

41,548

47,832

15

Civil Aviation

5,474

6,063

11

Coal

51

21

36,057

37,511

Fertilisers

Steel

Petrochemical

7
8

4,066

4,066

17

10

65,286

71,443

5,461

8,920

63

Petroleum

73

34

1,77,448

1,88,692

Power

99

52

2,27,823

2,43,653

Railways

126

35

61,394

1,48,132

141

10

Road Transport & Highways

146

85

94,418

96,357

11

Shipping & Ports

20

15,908

18,175

14

12

Telecommunications

14

5,965

5,906

-1

13

Urban Development

44,245

49,518

12

14

Water Resources

543

1,187

119

Source: MOSPI, December 2012 Flash Report

Steel Price Trends


Steel Prices has triple in last 10 years
Average Monthly prices of Steel Billet 2000-2011

Source: Crisil

127 | Study on Project Schedule and Cost Overruns

Cement Price Trends


South India has highest cement prices
Monthly Cement Price trends

Source: Embay cement report

India Energy Demand


India Energy demand is growing at a CAGR of 7.9 percent
India Primary Energy Demand

Source: BP Statistical Review, 2012

Study on Project Schedule and Cost Overruns | 128

Coal has more than 50 percent share in Indias total primary energy consumption
Primary Energy Consumption by fuel

Source: BP Statistical Review, 2012

Railways

Railways Sector: Project schedule and cost overun trends

Source: MOSPI, December 2012 Flash Reports

129 | Study on Project Schedule and Cost Overruns

Railways sector break up of 44 delayed projects in December 2012


Railway Sector: No of projects delayed (in months)

Source: MOSPI, December 2012 Flash Report

Source: Statistical Summary, Indian Railways

Study on Project Schedule and Cost Overruns | 130

Railways Rolling Stock


Sr. No.

Year

Stem locos

Diesel Locos

Electric Locos

Passenger carriages

EMU/DMU/DHMU

Rail cars

Other coaching vehicles

Wagons

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

43

44

43

42

43

43

4,816

4,843

4,963

5,022

5,137

5,197

3,294

3,443

3,586

3,825

4,033

4,309

38,855

40,696

42,079

43,526

45,048

46,688

6,454

6,641

6,984

7,487

8,053

8,617

41

38

38

37

34

34

5,905

6,180

5,985

6,477

6,500

6,560

2,07,723

2,04,034

2,12,835

2,20,549

2,29,997

2,39,321

Source: MOSPI, December 2012 Flash Report

Power Sector
Around 50 percent of the power sector projects are delayed
Power Sector: Project schedule and cost overun trends

Source: MOSPI, December 2012 Flash Reports

131 | Study on Project Schedule and Cost Overruns

Power sector break up of 52 delayed project in December 2012


Power Sector: No of projects delayed (in months)

Source: MOSPI, December 2012 Flash Report

57 percent of installed electricity generation capacity is coal-based


Breakup of installed electricity capacity source wise (as on 30 January, 2013)

Source: CEA

Study on Project Schedule and Cost Overruns | 132

Peak Power Demand Supply in India

Source: CEA

133 | Study on Project Schedule and Cost Overruns

State-wise estimated Average rate of electricity (updated up to March 2010)

State

Domestic
1KW
(1000KWh/
Month)

Andhra Pradesh
Assam
Bihar
Chattishgarh
Gujarat
Haryana

Agriculture
10HP
(2000KWh/
Month)

Agriculture
2HP
(4500KWh/
Month)

Commercial
30KW
(4500KWh/
Month)

Commercial
2KW
(3000KWh/
Month)

Domestic
10KW
(1000KWh/
Month)

238.5

492.25

593.5

623.83

33.75

29.75

340

475

558.33

564.18

271.19

373.65

243.8

395.38

515.87 U

500.08

124.00 U

124.00 U

140.45

166.07 R

74.00 R

74.00 R

187.4

368.9

403.35

460.2

110

110

437.83

617.83 U

660.66

703.72

55

55

353.83

526.53 R

367.4

463.44

481

481

25

25

H. P.

221.45

307.71

486

488.88

210.38

204.88

J&K

129.86

234.93

242.4

380.07

61

61

Jharkhand

161

180

436.67 U

436.67

52

52

107

136.33 R

Karnataka

292.43

570.52 D

688.63 D

710.68 D

292.43

527.47 E

683.38 E

705.43 E

281.93

507.52 F

639.63 F

656.78 E

187

517.61

775.83

952.17

73.74

73.74

386.2

592.24 U

601.04

602.69

217.5

374.8

555.85 R

541.75

543.24

Kerala
Madhya Pradesh
Maharashtra

247.5

277.94

598.72

530.88

781.58

133.44

133.44

Orissa

135.2

286

384.8

452.75

102

102

Punjab

320.2

483.22

550.1

550.1

Rajasthan

417.5

392.75 U

556.67

555.78

126.5

116.5

390.25

358.53 R

Tamilnadu

120

269.5

602

608.53

Uttarpradesh

369

393.00 U

505.67 U

505.67 U

224.00 U

224.00 U

124

124.00 R

232.33 R

232.33 R

91.50 R

91.50 R

Uttarakhand

230

216.5

375

436.76

85.00 U

85.00 U

West Bengal

272.59

556.06 U

471.41 U

645.99 U

164.15

162.19

Ar. Pradesh

345

345

410

410

265

265

Goa

138

232.5

383

429.67

118

118

Chadigarh

179

304

387

387

165

165

159.6

329.7

463.4

526.4

Delhi NDMC
Source: CEA Annual Report, 2010-11

Study on Project Schedule and Cost Overruns | 134

Petroleum Sector
Around 45 percent of the petroleum sector projects are delayed
Petroleum Sector: Project schedule and cost overun trends

Source: MOSPI, December 2012 Flash Reports

Petroleum sector break up of 39 delayed projects in December 2012


Petroleum Sector: No of projects delayed (in months)

Source: MOSPI, December 2012 Flash Report

135 | Study on Project Schedule and Cost Overruns

Company

Location

IOC

Capacity (mtpa)
01.04.2013

Digboi

0.7

Guwahati

1.0

Barauni

6.0

Baroda

13.7

Haldia

CPCL

7.5

Mathura

8.0

Panipat

15.0

Chennai

10.50

Narimanam
BRPL

1.0

Bongaigaon

2.4

Total - IOC

65.8

BPCL

Mumbai

KRL

Cochin

NRL

Numaligarh

12.0
9.5
3.0

Total - BPCL

24.5

HPCL

Mumbai

6.5

Vizag

8.3

HMEL, GGSR

9.0

Total - HPCL

23.8

MRPL

Mangalore

15.0

RIL

Jamnagar

33.0

RIL (SEZ)

Jamnagar

27.0

ONGC

Tatipaka

0.1

Essar Oil

Vadinar

20.0

BORL

Bina

6.0

Total

215.1

Source: PPAC

Note : Capacity as on April 2013

Petroleum Products for 2011-2012 (MTPA)


Distillates
Light distillates

Product
LPG

Total
Source:PPAC

Exports
5.0

0.2

MS

27.2

15.0

0.7

14.3

Naphtha

18.8

11.2

1.9

10.2

55.6

41.5

7.5

24.7

8.0

8.2

0.6

0.0

SKO
ATF

10.1

5.5

0.0

4.6

HSD

82.8

64.8

1.1

19.9

100.9

78.5

1.7

24.5

FO/LSHS

19.4

9.2

0.9

7.9

Bitumen

4.6

4.6

0.1

0.0

23.4

14.1

4.7

3.1

47.4

27.9

5.7

11.0

203.9

148.0

14.9

60.2

Others
Sub Total

Imports

15.4

Sub Total
Heavy distillates

Consumption

9.6

Sub Total
Middle distillates

Production

Study on Project Schedule and Cost Overruns | 136

Coal Sector
One-third of coal sector projects are delayed
Coal Sector: Project schedule and cost overun trends

Source: MOSPI, December 2012 Flash Reports

Coal sector break up of 21 delayed projects in December 2012


Coal Sector: No of projects delayed (in months)

Source: MOSPI, December 2012 Flash Report

137 | Study on Project Schedule and Cost Overruns

Coal production and consumption have grown at a CAGR of 4.9 percent and
8.6 percent respectively
Coal Sector: Production and Consumption

Source: Annual Report, Ministry of Coal

Coal imports are increasing at a CAGR of 18.6 percent


Coal Imports Trends

Source: Annual Report, Ministry of Coal

Study on Project Schedule and Cost Overruns | 138

Majority of Indias coal reserves are non-coking coal


Coal Sector: Coal Reserves by type as on April, 2012

Source: Ministry of Coal

Steel Sector
Cost overrun has decreased in steel sector
Steel Sector: Project schedule and cost overrun trends

Source: MOSPI, December 2012 Flash Reports

139 | Study on Project Schedule and Cost Overruns

Steel sector break up of 10 delayed projects in December 2012


Steel Sector: No of projects delayed (in months)

Source: MOSPI, December 2012 Flash Report

Steel capacity utilization is consistently high at 85-90 percent


Crude Steel Production, Capacity and Capacity Utilization

Source: Annual Report 2012-13, Ministry of Steel

Study on Project Schedule and Cost Overruns | 140

Steel imports are increasing and exports are decreasing


Export Import Trends for Finished Steel

Source: Annual Report 2011-12, Ministry of Steel

Telecom Sector
In last year several telecom projects were completed
Telecom Sector: Project schedule and cost overun trends

Source: MOSPI, December 2012 Flash Reports

141 | Study on Project Schedule and Cost Overruns

Telecom sector break up of 8 delayed projects in January 2012


Telecom Sector: No of projects delayed (in months)

Source: MOSPI, December 2012 Flash Report

Wireless ARPU have stabilized in last few years


Wireless ARPU

Source: Department of Telecom

Study on Project Schedule and Cost Overruns | 142

Subscriber base and teledensity has started declining


Total Subcriber base and Teledensity

Source: Department of Telecom

Internet users are increasing at a CAGR of 19 percent p.a


Internet and Broadband User

Source: TRAI; Crisil

143 | Study on Project Schedule and Cost Overruns

Data revenues share in the total revenue is increasing


Data Revenues as % of Total revenues

Source: Department of Telecom

Shipping & Port Sector


Around 40 percent of shipping and port sector projects are delayed
Shipping & Port Sector: Project schedule and cost overun trends

Source: MOSPI, December 2012 Flash Reports

Study on Project Schedule and Cost Overruns | 144

Shipping & port sector break up of 7 delayed projects in December 2012


Shipping & Port Sector: No of projects delayed (in months)

Source: MOSPI, December 2012 Flash Report

(000 tonnes)

POL

Iron ore*

Fertilizers
Finished

Kolkata

Coal

Raw

Thermal

Container

Coking

Tonnage

Others

Total

TEUs

700

158

64

29

37

6,957

463

3,855

11,800

Haldia

6,196

1,715

109

278

1,976

4,502

2,869

137

10,439

28,084

Paradip

16,466

1,834

142

4,004

21,394

4,912

171

13

7,629

56,552

Visakhapatnam

15,021

12,279

2,018

565

2,951

6,820

4,554

248

14,752

58,960

Ennore

1,124

14,240

685

1,836

17,885

Chennai

13,425

52

190

231

29,708

1,539

9,798

53,404

Tuticorin

792

487

564

6,661

9,372

479

10,384

28,260

Cochin

13,896

22

331

28

4,607

326

961

19,845

New Mangalore

24,301

2,616

519

17

2,553

4,357

692

48

1,981

37,036

823

7,421

78

768

6,605

213

20

1,785

17,693

34,784

156

356

4,210

829

58

17,702

58,037

Mormugao
Mumbai
JNPT

4,286

57,909

4,259

2,306

64,501

Kandla

54,355

1,006

3,678

946

4,064

374

1,934

118

27,265

93,622

Total

186,169

27,081

7,463

7,321

58,845

28,292

119,815

7,708

110,693

545,679

Note: Notes: POL: Petroleum, oil and lubricants; TEU: Twenty-foot equivalent unit; JNPT: Jawaharlal Nehru Port Trust
Source:IPA, CRISIL

145 | Study on Project Schedule and Cost Overruns

Capacity at Major Ports


(million tonnes)

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

Kolkata

12.6

13.4

14.6

15.8

15.8

16.4

16.4

17.1

Haldia

42.2

43.5

46.7

46.7

46.7

50.7

50.7

50.8

Paradip

51.4

56.0

56.0

71.0

76.5

76.5

76.5

106.3

Visakhapatnam

55.0

58.5

61.2

62.2

62.2

64.9

72.9

67.3

Ennore

48.8

50.0

53.4

55.8

69.4

79.7

79.7

83.2

Chennai

13.0

13.0

13.0

16.0

16.0

31.0

31.0

31.0

Tuticorin

20.6

20.6

20.8

22.8

22.8

27.0

33.3

33.3

Cochin

19.4

20.2

28.4

28.4

29.9

41.0

41.0

44.7

New Mangalore

38.0

41.3

43.5

44.2

44.2

45.6

51.0

69.0

Mormugao

29.5

30.0

33.1

33.1

37.1

41.9

41.9

41.9

Mumabi

43.8

44.7

44.7

43.7

43.7

44.5

44.5

44.5

JNPT

36.1

52.4

54.3

58.0

58.0

64.0

64.0

64.0

Kandla

46.0

61.3

63.5

77.3

77.2

86.9

86.9

91.2

456.2

504.8

533.0

574.9

599.4

670.1

689.8

744.3

Total
Source:IPA , CRISIL

(Nos.)
Kolkata

Dry Bulk

Liquid Bulk

60

239

Haldia

761

Paradip

904
1,147

Visakhapatnam

Break Bulk

Containers

Others*

319

577

853

57

317

75

715

219

Total

27

1,222

291

1,962

30

16

1,342

351

38

2,470

Ennore

241

92

52

385

Chennai

223

507

524#

789

1,519

Tuticorin

425

226

430

365

46

1,492

50

359

37

389

547

1,382

Cochin
New Mangalore

206

693

157

80

19

1,155

Mormugao

547

153

37

48

785

Mumabi

333

1,102

568

14

40

2,057

66

445

45

2,233

127

2,916

715

1,318

456

225

2,714

5,678

7,019

2,924

5,392

912

21,401

JNPT
Kandla
All Ports
Source:IPA , CRISIL

Study on Project Schedule and Cost Overruns | 146

Roads and Highways


Over the year, schedule overrun in road sector projects has decreased
Road Transport & Highway Sector: Project schedule and cost overrun trends

Source: MOSPI, December 2012 Flash Reports

Road sector break up of 86 delayed projects in December 2012


Road Transport & Highway Sector: No of projects delayed (in months)

Source: MOSPI, December 2012 Flash Report

147 | Study on Project Schedule and Cost Overruns

State-wise Road length in relation to area and population


Totla Roald
Length (kms)

States
Andhra Pradesh

Road Length
Per 1,000 sq kms of area per 1,000 of population

3,45,012

1,254.4

4.2

16,494

197.0

13.8

Assam

2,30,334

2,936.5

7.8

Bihar

1,20,127

1,275.7

1.3

Arunachal Pradesh

Chhattisgarh

74,434

550.6

3.2

Goa

10,569

2,854.9

6.6

Gujarat

1,46,630

748.0

2.6

Haryana

29,726

672.4

1.2

Himachal Pradesh

36,298

652.0

5.5

Jammu & Kashmir

22,323

100.5

2.0

Jharkhand

17,531

219.9

0.6

Karnataka

2,55,454

1,331.9

4.4

Kerala

2,04,757

5,268.7

6.1

Madhya Pradesh

1,65,740

537.7

2.4

Maharashtra

2,23,322

725.8

2.1

Manipur
Meghalaya

16,502

739.1

7.0

9,839

438.7

3.9

Mizoram

6,158

292.1

6.4

Nagaland

22,304

1,345.3

10.3

Orissa

2,15,404

1,383.4

5.4

Punjab

45,178

897.1

1.7

Rajasthan
Sikkim
Tamil Nadu
Tripura
Uttar Pradesh

1,71,479

501.1

2.7

1,873

264.0

3.2

1,81,213

1,393.3

2.7

31,733

3,026.2

9.1

2,84,673

1,181.6

1.5

Uttarakhand

41,041

767.4

4.3

West Bengal

2,11,770

2,386.1

2.4

Source: MOSPI ,MORTH

Capacity of National Highways


Width of
carriageway
> Four - lane
Two - lane

National Highways National Highways National Highways National Highways


length (2007-08)
length (2008-09)
length (2009-10)
length (2010-11)
(km)

(per cent)

(km)

(per cent)

(km)

(per cent)

(km)

(per cent)

National Highways
length (2011-12)
(km)

(per cent)

9,325

14.0

12,053

17.1

16,314

23.0

16,187

22.8

17,700

24.7

39,079

58.5

37,646

53.4

36,886

52.0

36,995

52.2

38,536

53.7

One - lane

18,350

27.5

20,849

29.6

17,734

25.0

17,752

25.0

15,536

21.6

Total

66,754

100.0

70,548

100.0

70,934

100.0

70,934

100.0

71,772

100.0

Source: MOSPI ,MORTH

Road Network in India as in year 2011-2012


Road Network
National Highway

Length
(Kilometers)

Percentage of Toatal
Length

71,772

1.7

State Highway

154,522

3.8

Major and other District Roads

266,058

6.5

40
40

Rural roads

3,617,240

88

20

Total

4,109,592

100

100

Source: MOSPI ,MORTH

Study on Project Schedule and Cost Overruns | 148

Civil Aviation
50 percent of the civil aviation projects are delayed in December 2012
Civil Aviation Sector: Project schedule and cost overrun trends

Source: MOSPI, December 2012 Flash Reports

Civil aviation sector break up of 3 delayed projects in December 2012


Civil Sector: No of projects delayed (in months)

Source: MOSPI, December 2012 Flash Report

149 | Study on Project Schedule and Cost Overruns

Domestic freight (tonnes)


Airports
Metro Airports
MUMBAI
DELHI
CHENNAI
BANGALORE
KOLKATA
HYDERABAD
Total
Non - metro Airports
AHMEDABAD
GOA
TRIVANDRUM
CALICUT
GUWAHATI
AMRITSAR
SRINAGAR
JAIPUR
NAGPUR
COCHIN
PUNE
COIMBATORE
LUCKNOW
MANGALORE
VARANASI
PATNA
TRICHURAPALLI
VADODARA
JAMMU
INDORE
VISAKHAPATNAM
AGARTALA
BHUBANESWAR
UDAIPUR
BAGDOGRA
PORTBLAIR
MADURAI
BHOPAL
RAJKOT
AURANGABAD
RAIPUR
IMPHAL
CHANDIGARH
LEH
JUHU
JODHPUR
RANCHI
SILCHAR
TIRUPATI
DIBRUGARH
Other Airports
Total
Grand Total
Source: Airport Authority of India

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

1,52,159
1,16,027
42,969
67,642
47,144
22,934
4,48,875

1,59,724
1,30,904
41,918
70,011
49,989
27,119
4,79,665

1,51,328
1,28,332
52,806
58,310
47,305
24,580
4,62,661

1,74,184
1,63,913
71,246
71,893
70,168
30,164
5,81,568

1,99,831
2,09,113
93,336
87,515
84,861
36,390
7,11,046

190288
200525
84730
83256
81703
34472
6,74,974

16,868
4,181
1,413
602
1,919
111
1,918
2,539
4,058
6,166
9,983
3,617
1,653
410
352
1,768
12
1,962
1,167
3,378
535
4,737
1,258
568
1,962
655
744
812
1,058
1,600
568
395
902
334
101
336
338
80,980

12,739
3,289
1,415
363
1,642
376
1,501
2,142
3,773
5,934
11,653
4,616
1,873
311
315
1,957
20
2,198
1,094
4,952
766
5,979
1,287
636
2,139
572
1,028
666
963
1,444
636
413
842
412
90
449
319
27
299
81,130

11,018
3,460
1,442
368
5,276
2,290
1,815
5,763
4,717
7,857
17,845
6,285
3,407
382
363
1,928
25
1,745
1,157
5,301
938
6,755
1,998
869
2,290
574
924
635
1,247
1,593
4,719
219
1,368
383
n.a
677
342
23
331
1,057
1,09,386

15,060
4,247
1,540
282
8,520
161
2,016
8,177
9,145
8,610
27,828
6,637
3,492
305
422
3,279
0
2,099
1,371
5,380
1,107
7,105
2,667
0
1,114
2,299
580
1,175
933
1,841
2,356
6,002
1,013
1,426

19964
4016
1449
191
7761
89
2361
6475
4588
8533
24134
7281
3690
267
356
3425
0
2282
1265
4734
1046
6889
2286
0
1672
2386
842
890
738
1227
2870
4984
3042
1336

27
1,306
480
12
322
1,279
1,41,615

41
1650
497
26
343
1491
1,37,117

15,060
4,247
1,540
282
8,520
2,299
2,016
8,177
9,145
8,610
27,828
6,637
3,492
305
422
3,279
2,099
1,371
5,380
1,107
7,105
2,667
1,114
2,299
580
1,175
933
1,841
2,356
6,002
549
1,426
311
n.a.
1,306
480
13
322
995
1,43,290

4,82,457

5,32,191

5,60,645

5,43,791

6,90,954

8,54,336

Study on Project Schedule and Cost Overruns | 150

Airports
Metro Airports
MUMBAI
DELHI
CHENNAI
BANGALORE
KOLKATA
HYDERABAD
Total
Non - metro Airports
AHMEDABAD
GOA
TRIVANDRUM
CALICUT
GUWAHATI
AMRITSAR
SRINAGAR
JAIPUR
NAGPUR
COCHIN (CIAL)
PORT BLAIR
PORT BLAIR
PUNE
COIMBATORE
LUCKNOW
MANGALORE
VARANASI
BAGDOGRA
TRICHURAPALLI
GAYA
PATNA
Total
Other Airports
Grand Total
Source: Airport Authority of India

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

7.35
6.65
2.90
1.26
0.81
1.21
20.17

7.98
7.34
3.41
1.54
1.00
1.44
22.73

8.12
7.77
3.66
1.64
1.00
1.57
23.76

8.23
8.31
3.86
1.94
1.19
1.72
25.25

9.08
9.28
4.25
2.22
1.43
1.89
28.14

9.70
10.75
4.31
2.35
1.57
1.93
30.61

0.40
0.40
1.19
0.90
0.49
0.02
0.19
0.08
1.43

0.70
0.43
1.40
1.08
0.20
0.02
0.08
0.55
1.77

0.68
0.39
1.47
1.52
0.01
0.44
0.02
0.22
0.09
2.01

0.85
0.43
1.70
1.66
0.01
0.50
0.02
0.26
0.05
2.23

0.05
0.01
0.13
0.03
0.03
0.16
0.05
5.56

0.03
0.05
0.17
0.16
0.05
0.30
0.05
7.07

0.03
0.09
0.17
0.21
0.05
0.38
0.05
7.81

0.04
0.09
0.28
0.28
0.05
0.02
0.59
0.06
9.10

25.73

29.79

31.57

34.36

0.83
0.58
1.84
1.83
0.01
0.47
0.25
0.04
2.36
0.00
0.00
0.06
0.10
0.34
0.25
0.06
0.02
0.67
0.05
9.75
0.02
37.91

0.74
0.58
1.84
1.98
0.03
0.40
0.23
0.04
2.59
0.00
0.06
0.10
0.36
0.26
0.06
0.02
0.79
0.08
10.17
0.02
40.80

151 | Study on Project Schedule and Cost Overruns

International freight for the last six years (in tonnes)


Airports
Metro Airports
MUMBAI
DELHI
CHENNAI
BANGALORE
KOLKATA
HYDERABAD
Total
Non - metro Airports
AHMEDABAD
GOA
TRIVANDRUM
CALICUT
GUWAHATI
AMRITSAR
SRINAGAR
JAIPUR
NAGPUR
COCHIN
PUNE
COIMBATORE
LUCKNOW
MANGALORE
VARANASI
PATNA
TRICHURAPALLI
GAYA
Total
Other Airports
Grand Total
Source: Airport Authority of India

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

3,27,507
2,74,801
1,95,197
97,847
36,379
21,715
9,53,446

3,73,770
3,01,959
2,27,958
1,07,701
41,004
24,059
10,76,451

3,78,610
2,97,931
2,19,562
99,690
40,743
29,665
10,66,201

4,08,452
3,33,473
2,49,522
1,02,751
40,088
36,295
11,70,581

4,70,402
3,90,932
2,95,497
1,35,263
45,098
42,170
13,79,362

4,67,182
3,67,830
2,72,461
1,41,693
43,890
43,627
13,36,683

4,126
964
30,465
10,691
51
1,744
728
1
17,009
7
1,615
158
868
68,427

6,708
775
30,673
8,747
6
1,252
395
4
18,987
1
1,300
134
13
1,153
70,148

10,294
688
30,169
12,556
2
1,798
340
217
25,219
917
49
3
904
83,156

11,657
917
31,708
17,132
2,784
446
279
32,779
702
378
1,349
1,00,131

10,21,873

11,46,599

11,49,357

12,70,712

12,980
2,535
37,795
21,964
5,834
398
346
32,198
390
586
1,775
1,16,801
76
14,96,239

11,793
2,154
46,753
25,400
6,998
235
388
34,173
467
839
1
2,012
1,31,213
14,67,896

Study on Project Schedule and Cost Overruns | 152

Airports
Metro Airports
MUMBAI
DELHI
CHENNAI
BANGALORE
KOLKATA
HYDERABAD
Total
Non - metro Airports
AHMEDABAD
GOA
TRIVANDRUM
CALICUT
GUWAHATI
AMRITSAR
SRINAGAR
JAIPUR
NAGPUR
COCHIN
PORTBLAIR
PUNE
COIMBATORE
LUCKNOW
MANGALORE
VARANASI
PATNA
TIRUCHCHIRAPPALLI
GAYA
VADODARA
JAMMU
INDORE
VISAKHAPATNAM
AGARATALA
BHUBANESWAR
UDAIPUR
BAGDOGRA
MADURAI
BHOPAL
RAJKOT
AURANGABAD
RAIPUR
IMPHAL
CHANDIGARH
LEH
DIBRUGARH
TIRUPATI
JUHU
JODHPUR
RANCHI
SILCHAR
Total
Other Airports
Grand Total

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

14.90
13.79
6.08
6.86
5.19
4.54
51.36

17.88
16.63
7.21
8.58
6.46
5.54
62.30

15.32
15.07
6.18
7.12
5.99
4.65
54.33

17.37
17.81
6.67
8.00
6.86
4.80
61.51

20.00
20.67
7.80
9.37
8.20
5.71
71.75

21.04
25.13
8.62
10.34
8.74
6.52
80.39

2.09
1.81
0.60
0.23
1.07
0.11
0.68
0.60
0.58
1.13
0.50
1.53
0.85
0.48
0.45
0.32
0.31
0.05
0.00
0.40
0.47
0.36
0.33
0.32
0.35
0.24
0.26
0.26
0.17
0.16
0.17
0.25
0.21
0.15
0.14

2.46
2.14
0.70
0.23
1.34
1.14
0.76
0.77
0.13
1.57
0.33
1.64
1.01
0.54
0.55
0.40
0.39
0.09
0.00
0.50
0.55
0.50
0.55
0.41
0.41
0.29
0.37
0.41
0.29
0.15
0.20
0.41
0.32
0.23
0.17

2.14
1.83
0.48
0.16
1.37
0.13
0.72
0.98
0.71
1.35
0.48
1.74
0.92
0.65
0.49
0.36
0.34
0.09
0.00
0.44
0.40
0.60
0.60
0.37
0.67
0.26
0.44
0.35
0.23
0.13
0.19
0.40
0.32
0.36
0.20

2.68
2.20
0.64
0.21
1.58
0.20
0.91
1.27
0.76
1.65
0.52
2.21
1.01
0.91
0.56
0.43
0.55
0.10
0.00
0.50
0.52
0.70
0.63
0.50
0.83
0.36
0.53
0.37
0.26
0.19
0.22
0.44
0.41
0.47
0.23

0.14
0.11
0.15
0.12
18.16

0.14
0.14
0.11
0.15
22.52

0.15
0.08
0.25
0.14
21.54

69.52

84.81

75.87

0.15
n.m
0.27
0.15
26.12
1.41
89.04

3.22
2.50
0.68
0.23
1.92
0.30
1.04
1.41
1.20
1.98
0.58
2.75
1.14
1.24
0.59
0.50
0.84
0.09
0.00
0.60
0.69
0.88
0.71
0.75
1.04
0.37
0.65
0.39
0.32
0.23
0.27
0.53
0.56
0.65
0.26
0.23
0.17
0.00
0.18
0.36
0.16
32.22
1.55
105.52

3.95
2.94
0.98
0.23
2.22
0.49
1.63
1.60
1.38
2.13
0.61
3.23
1.24
1.66
0.63
0.68
1.02
0.12
0.02
0.67
0.89
1.11
0.96
0.84
1.25
0.37
0.71
0.51
0.42
0.26
0.40
0.80
0.73
0.80
0.37
0.23
0.24
0.00
0.21
0.49
0.21
39.24
1.87
121.51

Source: Airport Authority of India | n.m: Not Meaningful

153 | Study on Project Schedule and Cost Overruns

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